Tariffs Catch-All

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Zoo_View said:
Also, everything I’ve ever read indicates that the “wealth effect” of a rising market positively influences the spending habits of people who are not invested in market; and, the reverse is true - in a bear market, even non-investors become increasingly concerned and pessimistic.
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I could be wrong, but I think it's more that the wealth effect makes consumers feel richer, so they buy more stuff, and those purchases are booms for the non-investor class. I don't think the wealth effect touches the non-invested worker directly. But directly or indirectly, it doesn't matter that much.
 
A sizable drop in margin would freak out a bank. Reduced margins means that the enterprise would have a reduced chance of succeeding as an ongoing enterprise, which increases the risk of the loan.
 
Huh? said:
The larger issue is the loss in revenue from price elasticity when you raise your prices to accommodate the tariff. Then your net margin decreases because you have less revenue to apply to your more fixed S, G&A costs.
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Right. That I understand. Absolutely.

The problem, though, is that the multiplicative markup only exacerbates that issue, right? Let's say a product leaves the factory costing $20. Old system: wholesaler marks it up 50%, so now it's $30. Retailer also marks it up, let's say 50% (I don't know the numbers and they don't matter much), so it's now retailing for $45.

New system: product leaves the factory costing $40. Wholesaler marks it up to $60 and the retailer maintains that 50% margin and it's now retailing for $90. That's a doubling in price because there's a doubling at every stage. But if the wholesaler retains the $10 markup and the retailer the $15 markup -- which were profitable! -- then the retail price is $65. Bad, but hell of a lot better than $90.

Just seems to me that distributors would lose a lot more revenue by pumping prices to the point where product can't be sold, than by keeping their markup tied to their value-add. But again, it's often the case that people who merely observe markets from the outside, with little detail, will often see irrationality where none exists. I'm trying to avoid that, but I'd still like it to make sense.
 
CRHeel94 said:
A sizable drop in margin would freak out a bank. Reduced margins means that the enterprise would have a reduced chance of succeeding as an ongoing enterprise, which increases the risk of the loan.
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But by the same token, revenue would be way up! If you were doing $10M in business, and suddenly you're doing $20M in business, the lower margins would lead to the same profit.

This is the explanation I've seen elsewhere on the internet, and it just doesn't make economic sense. The business has the same risk level as before. Its operational leverage hasn't changed.

Maybe the answer is that small business loans are not processed with a great deal of intelligence because intelligence is too costly. Like, you'd get a person to evaluate a $1B loan; a $1M loan might go into a formula because it's too expensive otherwise, and the formula doesn't know about steep tariff increases. And maybe also the reason is that people expect that banks will nix their loans on declining margins, even if the banks wouldn't.
 
Sorry, I thought I had my graph set on one minute bars but it's 5 minute bars. Still, a 325 jump in the S&P's in 15 minutes is.. something. The Dow's jump (from low tick to high) was 2460 points in 15 minutes. Damn...
 
I'm so glad that those responsible for our first liberation had a bit more resilience than Trump.

What a fucking laughingstock.
 
lawtig02 said:
What a fucking dumb fuck. Thanks, dumb fuck Trump voters.
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The irony is that, even in lifting the tariffs, he did so in the stupidest possible way. "Pausing" them for 90 days does not take away uncertainty. So we're going to get decreased economic activity, and collect no revenue.

Literally, Trump has been bragging about tariff revenue but have we actually had tariffs in place long enough to collect anything?
 
superrific said:
Right. That I understand. Absolutely.

The problem, though, is that the multiplicative markup only exacerbates that issue, right? Let's say a product leaves the factory costing $20. Old system: wholesaler marks it up 50%, so now it's $30. Retailer also marks it up, let's say 50% (I don't know the numbers and they don't matter much), so it's now retailing for $45.

New system: product leaves the factory costing $40. Wholesaler marks it up to $60 and the retailer maintains that 50% margin and it's now retailing for $90. That's a doubling in price because there's a doubling at every stage. But if the wholesaler retains the $10 markup and the retailer the $15 markup -- which were profitable! -- then the retail price is $65. Bad, but hell of a lot better than $90.

Just seems to me that distributors would lose a lot more revenue by pumping prices to the point where product can't be sold, than by keeping their markup tied to their value-add. But again, it's often the case that people who merely observe markets from the outside, with little detail, will often see irrationality where none exists. I'm trying to avoid that, but I'd still like it to make sense.
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Yea, but in both cases the end consumer is the one paying the increase, they have limited funds and they are setting these increases on multiple items, it's going to be bad.
 
superrific said:
The irony is that, even in lifting the tariffs, he did so in the stupidest possible way. "Pausing" them for 90 days does not take away uncertainty. So we're going to get decreased economic activity, and collect no revenue.

Literally, Trump has been bragging about tariff revenue but have we actually had tariffs in place long enough to collect anything?
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Also NO ONE is going to invest in manufacturing when they can't guarantee if the tariffs will be in place to necessitate said manufacturing investment.
 
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