Yes Tariff’s do put money in the Governments pocket, but not the way it is being portrayed.

Lets say the tariff is 25% on a Chinese made TV set. The importer (US Company) pays China $100 and pays the US government $25. The importer wants to stay in business so must pass the $25 cost onto the retailer. The retailer also wants to stay in business so passes the $25 cost onto the consumer. Last weeks $100 TV is now a $125 TV.

The tariff has had zero effect on China and has given the US economy a boost of $25. The boost coming out of the pockets of US consumers.

It is at this point the Pro Tariff faction shout, ‘Build the product here and there are no tarrifs, problem solved’!

This answer is ridiculous, we lost the ability to manufacture goods of quality and price competitiveness in the 1950s and 60s. Japan killed our domestic electronics market with cheaper smaller and more reliable The next battle came in the 70’s, it was the perfect storm, The US car manufacturers were building gas guzzling ‘Land Yachts’ and suddenly there was a gas crisis. Suddenly the cheap, fuel efficient and reliable Japanese car was the winner.

So, back to the $100 TV. If we built it here so we could avoid the tariff’s, my guess is that it would be at least $250 and probably much more. Labor costs would be through the roof. Even worse we have not got the ability to manufacture the parts, the screens and almost every other component are not available from US manufacturers, do we invest in producing or import the parts?

This is a very important question. Many electronic components require ‘rare earth minerals’ and the truth is… Russia and China are the kings in that arena. Might these goods become even ‘rarer’ and more expensive?

After Japan kicked the US butt with car manufacturing the US fought back. The price and quality issue was addressed. The manufacturing of many parts, indeed, whole cars were outsourced to other countries, Canada and Mexico are fine examples. This is all well and good and a win win until you start slapping tariffs on stuff. Suddenly parts and even completed items with a well known US brand name, Harley Davidson, Ford, Dodge, etc, find themselves caught up in the stupidity.

Car brands such as Honda and Volkswagon are also caught in this tariff trap. These companies have invested $billions creating US based manufacturing and assembly plants, but for quality purposes Insist that key components be made where the company is based. A good example is Harley Davidson, much of the bike is made in plants outside of the US, but the engines are all made here.

So they get hit by tariff’s. The ‘skill’ and the ‘will’ to manufacture in the US was lost years ago.

Apple gave up manufacturing in the US decades ago. ‘You lose your shirt making products in the US’ is the popular chant. Even though Foxconn (Chinese manufacturer) and assembler of iPhones claims they are opening a $10 bil plant in Wisconsin that will employ 13,000 people. I question what they will be making here. High tech cheese? There is no way that they would be making iPhones unless it is the new $3000 model!

The long term effects? Ah this is where it gets interesting. Joe Consumer will slow down on buying discretionary goods made in China, Dollar Tree will have to rename itself to Dollar and a Quarter Tree.

Likewise manufacturers here in the US will start to see a weakness in sales in China. Farming has already been hit, Soy Beans are in the toilet and it is unclear just how long the Trump administration can bail out the Farmers.

It would be easy to write a book on the subject of tariff’s, Even the numbskull Stephen Moore that Trump recommended for a seat on the Fed Board thinks tariffs are a bad idea.

To quote Forrest Gump “Stupid is as stupid does”

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