Let me explain how work because you clearly haven’t a clue
My British company makes a product. Lets call them widgets.
A company in the USA needs widgets in its manufacturing processbut can’t source them in the USA.
They contract with my company to supply widgets at $100 per unit. I’m happy and export to the USA.
The American importer now has to pay $100 for the widget plus $25 import tax. Its the US company that pays not me. So each unit costs $125.
Now that US company has to make enough money to cover the $125 per unit and make a profit so they boost the price to say $200 per unit which is paid by the American consumer.
My British company still receives $100 per unit. The US company pays $100 for the widget plus another $25 to the US government. You the consumer pays $200.
Tariffs are not hurting me. I’m still in profit. Its hurt thecUS company a little bit but it can compensate by charging the consumer more. You, the consumer, is fucked.
Why on Earth do you imagine that “foreign countries absorb the cost”?
I make something. I export it to the USA at a modest profit. A reasonable business model is that something costs me $90 to make, and I sell it to a US customer at $100, of which $2 is P&P and I use the remaining $8 to put bread on the table.
Now, USA decides to charge my customer 25% extra on top of what I charge. What’s that to me? I still need to be paid the same amount of money, or my profits – bread on the table for my children – are gone. 25% is a lot for a business – most companies that produce stuff don’t have that sort of profit margin. In my example, for the cost to my customers to stay the same, I’d have to sell the stuff at $80 – less than it costs me to make it. I’m certainly not paying to have someone in the USA use my things. I will absolutely not “absorb the cost”. I would much rather not sell anything at all to the USA.
So to my customers in the USA, the price just went from $100 to $125.
You insist that this is not so, because you have no clue whatsoever how business works. You might imagine that I can just decide to produce it cheaper, and it will happen. This just is not so: if it was possible to produce it at $80, someone else would already be doing it and sell it at $90, out-competing me totally. You might imagine that it only costs me $50 to make, and I can live with less profits. This just is not so: if I produce it at $50, someone else also does, and charges $55 – again, I’m screwed if I try to charge $100 for it.
Your reasoning only works in a Communist economy, where someone can set prices by decree.
A producer may absorb small variations in the cost structure temporarily, but they will not absorb large additional costs. They will pass those costs on to the customer.
The only money that enters a supply chain comes from the consumer. The consumer is expected to pay all the costs because there is no one else inserting money into the chain. If the costs go up beyond what the consumers are willing to pay, no one up the chain is going to foot the bill. Production just stops.
Tariffs on the least expensive options available will cause their prices to rise, but they will not cause the most expensive options to come down in price. You won’t see American-made goods become less expensive. You’ll just see foreign goods become more expensive.
But the key here is you need to understand that no one is going to absorb the cost. That’s not how selling things work. If the cost associated with putting an item on the shelf goes up, the price that the item sells for will have to go up to pay those costs. NO ONE but the consumer is putting money into the chain.
