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WheatMillingtonyesterday at 8:06 PM4 repliesview on HN

Of course... who did you think would pay?


Replies

AnthonyMouseyesterday at 8:59 PM

> who did you think would pay?

The general premise of tariffs is that a foreign product costs e.g. $100 whereas a domestic product costs $120. If you then put a 50% tariff on the foreign product, it would cost $150, and then people would prefer the domestic product and only be paying 20% instead of 50%. Moreover, they might prefer the domestic product in general (e.g. higher quality and/or patriotism) and only buy the foreign product if it's actually less expensive, and then the foreign manufacturer would have to lower their price from $100 to $70 so that the tariff only raises the price to $105 because any higher price than that and they lose the business.

The result, in theory, is that you would pay $5 more rather than $50 more. Meanwhile the government collected $35 in tariffs on the foreign product, $30 of which came from the manufacturer rather than you, and that allows the government to lower your other taxes by $35 at the same level of government spending and borrowing.

There are essentially two things required for this to work in your favor on net: 1) the tariffs cause the foreign manufacturer to lower their pre-tariff prices at all, and 2) the government uses the tariff revenue instead of some other taxes they would have collected directly or indirectly from you, so that your net tax burden stays the same. It can also be some mix of these, e.g. the foreign manufacturer lowers their price by $10, you pay $15 in tariffs and get a $10 reduction in other taxes, and then you're ahead by $5.

Ironically, the primary way domestic taxpayers end up paying more is if the tariffs succeed in causing people to buy domestic products, because then there is no tariff revenue on the domestic products and people pay the higher price for the domestic products without a reduction in other taxes.

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betabyyesterday at 8:18 PM

Because Canadian government gives money to some industries to pay for tariffs. It's called Regional Tariff Response Initiative (RTRI).

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bdangubicyesterday at 8:29 PM

Mexico?

wolvoleoyesterday at 9:21 PM

Exactly. This sounds more like an onion headline, lol