Tariffs Catch-All

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China showed that if you have leveage (most counries don't) you have to use it. Back in April US kept raising tariffs on Chica, mocked them and said China was weak and would do what UIS told them to do. China then dropped tjhe rare earth elemts ban on US which severy harms US auto, EV, semicpnductor and defense industries. Trump caved and has been talking nice about China ever since.

EU had some leveate (digital services tax, their auto plants in SC and Alabama). Could have put those auto plant expansions on hold and threatendded a move to Mexico, China or Canada fpr tjpse and future plants.
 


We will see how much of the tariffs are absorbed by the US importers and how much they ultimately pass along to US consumers. If we are settling into a more stable high tariff environment, I suspect businesses will feel pressure to pass along more of those costs long term to protect their bottom line. But they will have to weigh that against pricing themselves out of the market. The strategies should start to become clearer in the third quarter once the bulk of post August 1 shipments work their way into inventory and onto shelves, which can take 6-8 weeks (more for bigger ticket items, less for perishables).
 
The Upstate South Carolina economy could suffer if BMW decides it is better off making cars outside of the US to avoid the steel tariffs. And as soon as the 50% steel tariff was announced, Nucor raised the prices of US-made steel, sorta like how private schools raise tuition by the amount of vouchers.

Pay attention Lindsay Graham.
 
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farce© said:
The Upstate South Carolina economy could suffer if BMW decides it is better off making cars outside of the US to avoid the steel tariffs. And as soon as the 50% steel tariff was announce, Nucor raised the prices of US-made steel, sorta like how private schools raise tuition by the amount of vouchers.

Pay attention Lindsay Graham.
Click to expand...
If I am a German company, I think I take the path that brings more jobs to Germany, but I'm not a rocket surgeon.
 


🎁 —> https://www.wsj.com/world/asia/u-s-...6?st=TBmYKn&reflink=desktopwebshare_permalink

Tokyo battles critics of the agreement, saying $550 billion in funding for U.S. industry will be almost entirely loans and loan guarantees​


“… Over the weekend, Akazawa said that only 1% to 2% of the $550 billion amount would be actual investment, with the rest coming in the form of loans and loan guarantees.

The government is facing a backlash from opposition lawmakers and some analysts who expressed concern that the trade agreement, as described by Trump and the White House, could humiliate Japan.

A White House fact sheet released last week said “Japan will invest $550 billion directed by the United States to rebuild and expand core American industries.” It said “the U.S. will retain 90% of the profits from this investment—ensuring that American workers, taxpayers, and communities reap the overwhelming share of the benefit.”

… A Japanese government fact sheet said government-affiliated financial institutions would handle the $550 billion commitment, not private-sector companies. In general, government institutions such as the JBIC focus on loans and loan guarantees, and direct investment in factories and mines is only a small part of JBIC’s work.

If Japan’s government banks issue loans to U.S.-based projects, they could be expected to earn tens of billions of dollars in interest, said Dai-ichi Life Research Institute economist Hideo Kumano.

“President Trump’s statement about ‘90% of the profit to the U.S., 10% to Japan’ is purely to draw the attention of his domestic supporters,” Kumano said. The actual deal “doesn’t sound so bad,” he said. …”
 
farce© said:
The Upstate South Carolina economy could suffer if BMW decides it is better off making cars outside of the US to avoid the steel tariffs. And as soon as the 50% steel tariff was announced, Nucor raised the prices of US-made steel, sorta like how private schools raise tuition by the amount of vouchers.

Pay attention Lindsay Graham.
Click to expand...
Hard to imagine it would happen, but losing BMW and Volvo would be the type of comet strike that could turn South Carolina blue, at least for one cycle.
 
farce© said:
The Upstate South Carolina economy could suffer if BMW decides it is better off making cars outside of the US to avoid the steel tariffs. And as soon as the 50% steel tariff was announced, Nucor raised the prices of US-made steel, sorta like how private schools raise tuition by the amount of vouchers.

Pay attention Lindsay Graham.
Click to expand...
The TACO man will hand out exemptions
 
nycfan said:


We will see how much of the tariffs are absorbed by the US importers and how much they ultimately pass along to US consumers. If we are settling into a more stable high tariff environment, I suspect businesses will feel pressure to pass along more of those costs long term to protect their bottom line. But they will have to weigh that against pricing themselves out of the market. The strategies should start to become clearer in the third quarter once the bulk of post August 1 shipments work their way into inventory and onto shelves, which can take 6-8 weeks (more for bigger ticket items, less for perishables).
Click to expand...

In a fully competitive market, there is no such thing as "pricing themselves out." Consider manufacturers of ball bearings. If the price of steel increases 10%, the prices of ball bearings will increase by 10%. All manufacturers have to pay the same. If a manufacturer could, say, raise prices only 5% in response to the steel increase, that suggests it could have been selling under the market price before the tariffs, which is not possible in a competitive market (i.e. all prices go to the least marginal cost).

Now, if you slap a sales tax on Coke and Pepsi, it's conceivable that the prices go up less than 100 cents on the dollar. That's because Coke and Pepsi have market power. They are already setting prices that maximize their profits, and if costs are relatively stable, they are essentially maximizing their revenues. And the revenue side of the equation doesn't change with the tariffs. If you look at the production function, you'd see some dependence on cost but less than in the case of a competitive market.

So I guess we find out how competitive our markets actually are. Of course, it's a bit complicated by the fact that not all producers are going to face the higher prices -- i.e. domestic producers are excepted by definition. But in many cases, the foreign goods are their own submarket -- there will still be elasticities but fewer. There's no domestically produced vehicle that can compete with the high performance European vehicles like BMW or Porsche (let's assume for now that BMW only manufactures in Europe, for illustration purposes). In that case, the analysis would proceed as above. In some cases, the most important competition for a producer isn't "a competitor product" but rather "no purchase."

(Note: I'm using autos as an example because it's familiar. Since auto tariffs fall under this agreement, they aren't the best example but let's think of the base case as zero tariffs and analyze what happens with the 15% added).

What likely happens if the tariffs stay is that the European cars will gradually become more niche and expensive. A base VW DOES compete with a lot of American made cars, and it will be harder to sell with a big tariff slapped on it. So the mix of cars coming from Europe will become more tilted toward luxury, as the elasticities there are lower. We've seen this effect already over the years: the workhorse cars in Europe -- i.e. Renault, Fiat -- don't get imported because they can't compete with American vehicles with the 15% or 20% tariff.

So this is why I created the "what have you lost" thread. The tariffs might not cause prices to rise on average; they might, instead, cause consumer choice to decline. Just like with my okra, it won't be the case that my grocery bill is higher. It's just that I can't eat one of my favorite vegetables.
 
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