alt Hacker NewsThe bring manufacturing back to the US never made sense to be numbers wise.
Thing A is currently manufactured in China | Vietnam | whatever lower cost country and sold for $x today. Slap on 50% tariffs so now it costs $1.5x. That provides an incentive to produce thing A locally sure.
But if you can already produce thing A locally for $x, you wouldn't have offshored the production in the first place. Maybe producing thing A locally will cost less than $1.5x, but it'll still be more than $x. So cost still end up increasing.
Am I missing something?
Replies
I think the long game answer is clear: Trump wants an old fashioned World War with China before 2027 and needs production back in the States.
Two typical scenarios that we know from the past in industries like cars for example.
Corp one has two factories one smaller one in the us one bigger one in the eu. They will now shift more of the production to the us from eu to avoid tariffs.
Corp two only has a factory in the eu. They will now build another factory in the us to be able to avoid tariffs and keep selling their goods at competitive prices.
That’s may be true. But why does Vietnam have such high tariffs? They should be competitive based on their lower costs right? So it’s simple: Vietnam can eliminate tariffs on imports and the U.S. would eliminate tariffs as well.
The missing piece is not all costs are passed on to consumers.
Company absorb costs all the time. If you think cutting your price by 10% will boost sales by 20%, you do it because total profit is higher even though per unit profit is lower.
And the reverse is true - companies might increase prices and accept lower volume.
Not to mention not all items are interchangeable. Is a car made in Mexico worth the same as the same model made in Germany?