Explain Like I'm Five

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If Trumps tariffs go thru would that not cause the countries the tariffs are imposed on just raise their prices? And a result of that hurt the american consumer? Why do it to begin with? (lemmy.world)

submitted 18 hours ago by [email protected] to c/[email protected]

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[–] [email protected] 1 points 3 hours ago* (last edited 3 hours ago) (1 children)

Compared to importing for 30% extra? The only reason that would happen is some mass market collusion. The prices will go higher, then manufacturing picks up locally, driving prices down, lower than it was previously - since you don't need to ferry them across an ocean. Foreign goods would be 30% more expensive.

At least that's the theory / how it is supposed to work. In reality, probably a shitton of issues, a new great depression and not much more manufacturing potential as a result. There will be tarrifs on the US too, needlessly closing off trade both ways.

[–] [email protected] 2 points 3 hours ago (1 children)

Your first paragraph assumes that labour costs are the same in both markets and that there is little development or tooling cost to setting up that manufacturing base locally. Both are false, and both of those are really the reason overseas manufacturing is a thing in the first place.

[–] [email protected] 2 points 3 hours ago

Depends on what you are manufacturing. Making shit with mills, CNC, lathes, injection molding? That's not a problem. CMM, EDM and very precise CNC? Yeah, that needs a machine with a high upfront cost. It all depends on if you are able to get customers and if you have the raw resources / the raw resources don't price you out of existence. Overseas manufacture is worth it because it used to be cheap labor costs. You had to fix a lot of things, but it was still cheaper than making it 100% in house. Then China started becomming less competetive and it still was cheaper, but barely. Add onto it a 30% tarrif and the entire equation changes.

Again, it probably will be painful. But we will have to see.