Who Actually Pays the Tariffs?
A common misconception is that foreign countries pay the tariffs imposed by the U.S. government. In reality, when goods arrive at U.S. ports, they are held until the importing company—often a domestic business—pays the required tariff. This means that the financial burden falls directly on U.S. importers, not the exporting foreign entities. And of course, the higher cost of goods means higher retail prices once these products hit shelves.
The Challenge of Domestic Manufacturing
The rationale behind imposing tariffs is to make imported goods more expensive, thereby encouraging companies to manufacture products domestically. However, this is far more difficult than it sounds. In many instances, the infrastructure or expertise to produce certain items simply doesn’t exist in the U.S. Building out these factories could take years, if not decades. Will tariffs that almost everyone agrees will not be permanent be enough of an incentive for businesses to risk spending the billions of dollars required to rebuild our manufacturing?
How Much Does it Cost To Make It In America?
I've tried to produce multiple products in the United States and each time it's failed. The factories simply do not exist here, but the few that do charge substantially more than working with a factory overseas. In my experience, manufacturing costs 8 to 12 times more in the USA than having it produced in another country and shipped in. This means that tariffs need to reach 800% before it would become cheaper to have a product made in America. This of course isn't feasible, as consumers would never buy products for 8X the price, and at those rates, the businesses and products would cease to exist.
Also it's important to remember that, products "made in America" are still currently made with foreign materials using foreign-made machines. Blanket tariffs would hit every business and factory for decades even though they were manufacturing products locally.
My hot sauce brand Oliveum is cooked and bottled in the USA but the bottles themselves are Chinese-made. A few commenters on my video said that I sold out my country by having my hot sauce bottles made in China. They fail to realize that every hot sauce bottle in America is already made in China.
How Much Will Tariffs Affect The Cost of Photography Equipment
Tony Northrup made a great video breaking down the cost increases we are about to see on camera gear based on their country of origin.
Impact on Camera Gear
The photography industry is particularly affected by these tariffs, as many camera manufacturers produce equipment in the countries facing higher duties:
• Canon: Manufactures in Japan (24% tariff) and Taiwan (32% tariff).
• Nikon: Produces in Thailand (36% tariff) and Japan.
• Sony: Operates factories in Thailand and Japan (24% tariff).
• Fujifilm: Manufactures in China (34% tariff) and Japan.
• Olympus (OM System): Primarily produces in Vietnam (46% tariff).
A Deeper Dive Into Trade Deficits, Tariffs, and How They Were Calculated
Ben Shapiro recently came out with a video that goes much deeper into these tariffs, and how they appear to have been calculated based on trade deficits, rather than being "reciprocal."
I would love to be able to easily and affordably manufacture products in the United States. Proponents of these tariffs seem to believe this is right around the corner. I hope they're right.
It's maddening. I've spoken to a number of people who think the foreign country pays the tariff. No, they don't. Worse yet is that these tariffs do not protect any US industries since pretty much the entire consumer camera and lens industry is overseas, mostly in Asia. And we will never, in the US, have those industries domestically. So these tariffs are idiotic and counter productive, like tariffs always are.
All you downvoters, let's hear your counterargument. What David wrote above is spot-on. American consumers ultimate pay the cost of tariffs. It won't be long now before prices on camera gear go up 25%-50%. And, there is no infrastructure in the U.S. to support the re-emergence of an American camera industry.
Thank you, Lee! Hopefully it will open some people's eyes to the absolute stupidity at work here.
Are we great again?
Milton, In Trump We Trust. That's the next executive action
By the look at the down votes, apparently not. LOL
For tariffs, the current strategy seems to be forcing other countries to the negotiating table. For example, in the past when they wanted to do USMCA type trade deals with many other countries, they refused as the existing terms were far in their favor, and USMCA would have them significantly lowering tariffs.
Currently a common global market outcome is that many nations have far better trade deals with each other than with the US. Furthermore companies do not like costly redundancies. The end result is a global trade field where the US in exposed to the full brunt of various high CET schedules while those same nations have many agreements with each other where tariffs are far lower. The end result is if you are a US company and you want your "Made in the USA" items to be sold in foreign markets, you will face very high tariffs where you will not be able to make your items competitive in those markets. On the other hand a company ready to expand globally will see that they could simply fire all of their US factory workers, and move the factory to a different country, and instantly have cheaper access to those global markets. The outcome from these policies as seen over the past few decades, is a hollowing out of national manufacturing, especially if they can simply move the factory outside of the US and instantly have far fewer trade barriers, and still maintain effectively free access to the US market. Anyone looking to expand globally would be crazy not to fire their US production staff.
The reason why the 1/2 reciprocal tariff method is being used, is that the countries with the highest tariffs with the US, also have a large industrial sector where their business model revolves around exporting to the US, this means that those are large segments of their economy that are not flexible, and will be unsustainable in that form if the US imposes similarly high tariffs.
This is why we now see a number of foreign countries now pushing for new trade agreements with a goal of tariff-free trade. Each nation that agrees to those terms, subsequently means that they become a nation where US based companies can access their market without the need to move their production out of the US. One of the first manufacturing hubs in the process of establishing such trade deals, is Vietnam, which a number of electronic manufacturers have moved to, especially networking equipment makers (after issues with those manufacturing segments in China).
Furthermore with the new tariff policy, semiconductors are exempt.
Overall the policy is structured to minimize impacts to popular items that aren't pure luxury, while maximizing impacts on those inflexible foreign industrial sectors. It is wreaking havoc on those economies since it is risking widespread collapse, and that is causing those governments to rush for a trade deal, and with a global policy, it discourages those nations from using many workarounds for them, while also subjecting the highest tariff nations to the same hollowing forces that they subjected the US to, by forcing those companies to quickly move production out of those nations and fire workers.
Aside from that, a push to bring more manufacturing back to the US is a 2 prong approach. First is lowering corporate tax rates to be more in line with the rest of the global market, otherwise companies will move their tax home to foreign nations (hence why so many of the highest valued US companies moved their tax home to Ireland). The second part is addressing global trade barriers that make it very difficult or even impossible for a US manufacturer to access foreign markets, and without addressing that, there will still be a massive pull factor to move production to any other nation that will not be subject to the CET of the target market, and if the move can be done without incurring any barriers to the US market, then US production becomes an unnecessary redundancy.
These points used to also be a very bipartisan one, as there are many videos from republicans and democrats, including prominent ones such as Nanci Pelosi, Barack Obama, Chuck Schumer, Bill Clinton, and even Bernie Sanders. (especially in their speeches from the early 2000's). Though each time there was an attempt to address it, there would be massive pushback from some stock holders and companies that profit from the trade issues, and the first sign of the stock market reacting emotionally, would lead them to back off, thus all of the issues they referenced, have only grown worse.
Great write up!
Well said...Yes we pay for the tariff on products, but at some point companies overseas have lots of excess product and will have to cut prices to keep up with volume reductions on good sold as well. As you said...their model is built on sales here not there.
Or complete Bollocks.
"For tariffs, the current strategy seems to be forcing other countries to the negotiating table."
No, that's just a fig leaf. There is no strategy here other than to make American businesses bow to Rump.
Currently 2 major nations have who have previously refused new trade deals, are now entering in trade talks, with support for a tariff-free trade agreement.
The 2 so far are Vietnam, and India.
India has a population of over 1.4 billion, and has a rapidly growing middle-class. This means that completion of the agreement will grant US manufacturers access to at least the middle and upper class of India's economy. While also resulting in tariffs that are lower than before.
Israel has already agreed to a zero tariff agreement.
Other nations that previously suggested retaliatory tariffs (including the UK), have paused such efforts, and have agreed to engage in trade negotiations with the US with agreements to cut tariffs, but no word on if they are open to a zero-tariff deal.
Japan has agreed to engage in new trade negotiations, but has not released any statement one way or the other as to whether they are open to a zero-tariff agreement.
South Korea, Thailand, and Argentina have released statements that they are open to negotiate to cut tariffs and trade barriers, though it it is clear that they are not in favor of a complete elimination of tariffs.
Mexico and Canada are in talks of essentially expanding USMCA, thus essentially expanding the range of items covered and possibly also closing some loopholes such as the over-limit schedule.
Numerous other nations have have social media posts from political officials about a willingness to enter trade talks but no official actions from their governments.
Other nations such as China are more reluctant, and have push for additional retaliatory tariffs, but they have had little to no impact on the US because China has traditionally had high tariffs on the US and before this new policy, had many very high tariffs, furthermore, for manufactured goods from any large corporation, their policies effectively require that the company open a factory within China, thus at best you will have US designed goods manufactured in China if you want to sell to their population. Those goods are also exempt from any tariffs, thus those items are not impacted, and even on the stock market where many stocks that rely more heavily on international trade and pay dividends. The ones that are in full compliance with China's policies, have not been impacted by those retaliatory tariff policies. China has long established government programs to subsidize industries, and have largely used it for long term profits, for example, offsetting costs so that a Chinese steel producer can sell refined steel for a similar cost to unrefined ore, thus bankrupting US steel makers, then once they are out of business, drastically raising steel prices above normal market rates, thus recouping the subsidies and turning greater profits. Such mechanisms are likely being used nor to support industries that will face a tariff barrier while political battles take place.
Overall, the strategy is already working for many countries, and retaliatory efforts do not have much of an impact because they are largely markets that US manufacturers could not access anyway, thus at best, you are dealing with niche foreign markets where a subset of the rich economic class would import directly or through intermediaries that cater to their wants. In those cases, such items would still sell unless those countries impose non-monetary restrictions along the levels of a trade sanction.
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