Tariffs

To me a striking example that currency devaluation and of course inflation are also taxes is the skilled, good looking, Alfa Romeo driving Edward Fox in The Day of the Jackal in 1973.
They enlist the services of a British assassin known by the code name "Jackal," a figure already credited with the assassination of Rafael Trujillo. Aware that targeting de Gaulle is extremely risky and demands a final retirement in anonymity, the Jackal insists on a fee of $500,000.
Poor assassin would be in food stamps if he kept the fee in cash :).

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The Day of the Jackal: A Day Cravat and an Alfa Romeo » BAMF Style

Vitals Edward Fox as “The Jackal”, mysterious professional assassin Montemurro Forest, Italy, August 1963 Film: The Day of the Jackal Release Date: May 16, 1973 Director: Fred Zinnemann Costume Design: Joan Bridge, Rosine Delamare, and Elizabeth Haffenden Background On le 14 juillet (or...
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There are cases where tariffs are paid by the selling country. This was the case in 2018 and 2019 when the $ strengthened increasing its buying power and negating the cost increases by virtue of the tariffs imposed on China, so it is not nonsense to say it. However Stephen Mirun, the Economist who wrote this paper did not determine a causal relationship, so the $ strengthening was considered an opportune coincidence unrelated to the tariffs. Indeed, the $ might move the other way exacerbating the inflationary effects and the recent bond yield increases indicate that the market thinks this might be the case. In that case, the tariffs are paid by consumers or importers reducing their profits by eating some of them plus the inflationary costs of the reduced buying power. Separately, so far this is mainly the markets' reaction and it is too early for the actual effects on the economy to fully filter through in costs to business and the consumer apart from the bond markets which will affect domestic US interest rates.
 
Rek said:
There are cases where tariffs are paid by the selling country. This was the case in 2018 and 2019 when the $ strengthened increasing its buying power and negating the cost increases by virtue of the tariffs imposed on China, so it is not nonsense to say it. However Stephen Mirun, the Economist who wrote this paper did not determine a causal relationship, so the $ strengthening was considered an opportune coincidence unrelated to the tariffs. Indeed, the $ might move the other way exacerbating the inflationary effects and the recent bond yield increases indicate that the market thinks this might be the case. In that case, the tariffs are paid by consumers or importers reducing their profits by eating some of them plus the inflationary costs of the reduced buying power. Separately, so far this is mainly the markets' reaction and it is too early for the actual effects on the economy to fully filter through in costs to business and the consumer apart from the bond markets which will affect domestic US interest rates.
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Agree its too early to tell, other than in the case of a direct purchase by a customer (e.g., a coupe owner) directly from a foreign seller. In that situation, the buyer will get hit with the tax.
 
ScottAndrews said:
As the OP. My observation was purely practical. There has been a lot of noise and misdirection about who pays for tariffs.

So here I am buying parts for my E9 restoration, and contrary to assertions by politicians about how those importing countries will be paying the U.S billions, I am faced with a $500 delivery cost on a $2K purchase.. (this is in addition to the $600 shipping cost!!)

So, pretty clear. The end user pays the tariff. Despite all assertions to the contrary, the tariff is a tax, paid to some extent (in my case 100%) by the consumer.
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Tariffs have ALWAYS hit the end user/consumer. To say or believe anything different is stupidity or more stupidity...
 
tferrer said:
Tariffs have ALWAYS hit the end user/consumer. To say or believe anything different is stupidity or more stupidity...
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My daughter was telling me about four hours ago how her company, who manufactures the product in China, has reached out to all their US vendors (marketing, design, advertising, packaging, shipping ) and asked them if they can lower their prices so they can deal with tariffs without losing market share...
Yes, somebody is paying for it, not always the consumer.
 
So if i shipped you a set of tyres now from the UK, then you think tariffs will be applied?

I didnt think it had started yet.

If i ship tyres from the UK, will the UK tariff apply, or the country in which they were made?

I beleive there is a clause for classic cars? i wonder if this can be extended to classic car parts?

As to who pays the tariff.

If you buy tyres from us at Longstone Tyres, then i beleive DHL will charge you a tariff.

If you buy the 195/70VR14 CN36 from Lucas Antique Tires, he will have bought them from Europe, and he will have paid the tariff, he will then inevitably have to make that tariff back in the retail price he sells them to you guys at. Of course he has to, he has wages and rent to pay. its a business. it might not seem like the end user is paying for it but of course you are.

However one thing does come to mind and that is that i beleive Lucas have these tyres in stock, and im not sure they have added the inevitable cost of the tarriffs if they are currently in place or the tariffs that are coming in the future, which ever way round, if you are thinking of getting some tyres in the near future i would be on the blower to Lucas now.
 
I'm trying to get a vendor to send me some (non-BMW) parts from the UK now, I also follow the auto parts space for work. From what I can tell right now:
-There is a reprieve from the 25% tariff on UK and EU stuff until May 3. However the 10% blanket tariff is still in place.
-There has been discussion about a carve-out for classic car parts but as of yet that does not exist.
-Seller is responsible for collecting and remitting the tariff.

Be interested if this reflects peoples' experience so far.
 
It is "settled economics" that a tariff or tax is partially paid by the producer, and partially by the consumer, the split depending on the elasticity of demand for the good in question. In the case of new parts for E9s, the demand is inelastic (people will pay the price because there is no option, in the short term) so the buyer bears the brunt. Used parts, not so much. In the case of classic cars, the buyer can buy a car already in the USA, or another brand of car, or a car from another country with lower tariffs, or no car at all, so the brunt will be borne by the seller. But this is way too complicated for 90% of the media and 75% of the people to grasp, and many of those that do grasp it find it inconvenient so they fall in line with the baying mob.
 
2002turbo said:
It is "settled economics" that a tariff or tax is partially paid by the producer, and partially by the consumer, the split depending on the elasticity of demand for the good in question. In the case of new parts for E9s, the demand is inelastic (people will pay the price because there is no option, in the short term) so the buyer bears the brunt. Used parts, not so much. In the case of classic cars, the buyer can buy a car already in the USA, or another brand of car, or a car from another country with lower tariffs, or no car at all, so the brunt will be borne by the seller. But this is way too complicated for 90% of the media and 75% of the people to grasp, and many of those that do grasp it find it inconvenient so they fall in line with the baying mob.;
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Approaching from a different angle can you say that the producer pays the entire tariff but then decides how much of that tariff they want to pass on to the consumer. If they don't have much of a profit margin they are either forced to exit the market or pass the entire tariff on to the consumer.
 
you can say that but in all likelihood it will be wrong, as i mentioned it is most determined by who the importer is - an individual / end user or a broker / distributor / reseller. the tariffs as designated does not address that - it only addresses that a tariff will be assessed for all goods coming into the USA. China and other foreign countries aren't selling their products speculatively into the USA, they are delivery purchased products ... in fact governments aren't selling products period, companies within countries are selling / exporting products. bottom line, we will pay more for products unless the exporter pays the tariff and doesn't pass it on ... and the likelihood of that is quite low.

on a side note, i bought a few small items from our friend Christoph Bier (CS Werk), and i paid zero tariff. it was in a small postal mailer. not a high dollar / euro amount, so the tariff would have only been 10 bucks or so.
 
I disagree. Any seller takes into account tariffs in a negotiation, regardless of who actually forks over the money. If there is competition from other countries, or domestically, the foreign company is going to have to reduce it's FOB price in order to make the (tariffed) sale. If the foreign entity has a worldwide monopoly, it will try to pass on the entire tariff but again, at the risk of losing the sale entirely so even then, it may eat part or all of the tariff. It all comes down to demand elasticity.

Sorry Mr. Moderator, I studied economics at MIT.
 
rsporsche said:
you can say that but in all likelihood it will be wrong, as i mentioned it is most determined by who the importer is - an individual / end user or a broker / distributor / reseller. the tariffs as designated does not address that - it only addresses that a tariff will be assessed for all goods coming into the USA. China and other foreign countries aren't selling their products speculatively into the USA, they are delivery purchased products ... in fact governments aren't selling products period, companies within countries are selling / exporting products. bottom line, we will pay more for products unless the exporter pays the tariff and doesn't pass it on ... and the likelihood of that is quite low.

on a side note, i bought a few small items from our friend Christoph Bier (CS Werk), and i paid zero tariff. it was in a small postal mailer. not a high dollar / euro amount, so the tariff would have only been 10 bucks or so.
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I totally agree with this including that the likelihood that the tariff is absorbed is quite low. I thought my view on this covered all of what you are saying - other than the likelihood part.
 
2002turbo said:
...It all comes down to demand elasticity.

Sorry Mr. Moderator, I studied economics at MIT.
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Wow, I am humbled!
The reason this minutia about how the producer behaves is important is because passing the cost to the consumer is inflationary, while producers sharpening their pencils and not passing it along is anti-inflationary I think. That net effect matters a lot but is not decidable a priori.
 
Arde said:
My daughter was telling me about four hours ago how her company, who manufactures the product in China, has reached out to all their US vendors (marketing, design, advertising, packaging, shipping ) and asked them if they can lower their prices so they can deal with tariffs without losing market share...
Yes, somebody is paying for it, not always the consumer.
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So, in that case it is the shareholders who are "paying" through reduced earnings/dividends
 
Arde said:
Wow, I am humbled!
The reason this minutia about how the producer behaves is important is because passing the cost to the consumer is inflationary, while producers sharpening their pencils and not passing it along is anti-inflationary I think. That net effect matters a lot but is not decidable a priori.
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I guess if we are discussing China then we can decide a priori - aint no one absorbing 150%. Europe at 35% will likely pass a big chunk of the cost to the consumer. Europe at 10% we can discuss.
 
2002turbo said:
I disagree. Any seller takes into account tariffs in a negotiation, regardless of who actually forks over the money. If there is competition from other countries, or domestically, the foreign company is going to have to reduce it's FOB price in order to make the (tariffed) sale. If the foreign entity has a worldwide monopoly, it will try to pass on the entire tariff but again, at the risk of losing the sale entirely so even then, it may eat part or all of the tariff. It all comes down to demand elasticity.

Sorry Mr. Moderator, I studied economics at MIT.
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well sorry to disagree with your highly educated self ... but, in the first go around of furniture tariffs on China ... the several million $$$ of furniture that we had on order, we the end user payed the additional amount due to the tariff imposed by tRump. the furniture had been agreed to on price and ordered 6 months before the tariffs were imposed and if we wanted the furniture, we had to pay the tariff or lose the significant deposits paid ... or we could order from somebody else, forfeit the deposits and wait 9 months to open the hotel. like i say from actual experience, it depends on what it is and who is importing it - period. and at the time, our CEO, had a masters from Wharton and there was zero way around it. your opinion talks about the seller taking into account - in importing there are various sellers, could be the manufacturer, could be the importer, could be the broker ... if the importer is the end user, and the tariffs are already in place, perhaps you can negotiate ... otherwise, get out the checkbook.
 
ScottAndrews said:
So, in that case it is the shareholders who are "paying" through reduced earnings/dividends
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In her case it is a small US company, not public, and the private shareholders are actually passing the burden to their US external functions, and for that reason that dynamic is anti-inflationary. This year their marketing, ad agencies, warehouse, shipping partners, etc., perhaps would make less money, which cools off the economy and presumably lowers interest rate and leads to the stability that the Fed's dual mission is after.
 
Well- you didn’t take into account that the product was purchased before tariffs were unexpectedly raised. It is that sudden change of tariffs that were 10 fold the previous tariffs that caused my business to eat those rates that were so high that my purchases were no longer profitable on the secondary market.

So your argument is worthless in regards to my purchase before tariffs were imposed.

University of California Irvine
Economic Analysis of Law 1980
 
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