Notices

Help with Tariffs

Old 06-30-2018, 07:14 PM
  #1  
Senior Member
Thread Starter
 
Join Date: Feb 2007
Location: Woodlands, Texas
Posts: 939
Default Help with Tariffs

i do no understand Tariffs. Lets say we charge a Tariffs to Germany on their cars of 2.5% and they charge a Tariff of 10% on ours. I am not sure of the numbers. Trump comes along and says he wants 10% on their cars after all fairs is fair. Now everyone is pissed off at Trump. Trump also says why not just cancel all Tariffs. We do not collect Tariffs and we do not pay Tariffs. It seems that the world has been taking advantage of us for a long time.........
Picaroon is offline  
Old 06-30-2018, 07:58 PM
  #2  
Senior Member
 
Join Date: Jul 2016
Posts: 630
Default

your example is pretty much the most simple and straight forward out there

in the case of Germany/USA and cars if the situation was as you say then the USA would have little to lose since the USA sells dramatically fewer cars to Germany than Germany does to the USA so the USA would be hurt far less on any reduction in sales to Germany Vs Germany and their reduction in sales to the USA

here are the issues as they are and slightly more complex.....you have to assume that a consumer will instead switch to a USA built car Vs a German built car because of the increased cost.....if the consumer goes ahead and buys the German car and pays the higher price well that USA consumer paid a higher price for the same product.....then you would have to assume that the USA government would do something beneficial with the increased tax revenues Vs what we all know they would do and that is find a way to do something destructive to USA business or consumers with that increased revenue

then there is also the issue that a USA consumer might just but a Japanese or British or Italian luxury car and thus there is no additional sales for USA builders and no additional tax/tariff dollars for the USA to use beneficially (or destructively as would most likely happen)

the HOPE would be that Germany reduces their tariffs on USA cars and then the USA does the same and that results in the same number of sales of German cars in the USA and a few more sales of USA cars in Germany and a net benefit to the USA in increased sales of USA cars (or more likely trucks) to Germany

what generally happens though is Germany looks at things made in the USA that are popular in Germany (probably liquor, software and computers, airplanes) and raises tariffs on those and tries to reduce the sales of those in Germany.....and more likely the USA consumer will just pay the higher price for the German car or they will buy some other foreign luxury car while Germany MIGHT be able to find the products they need from some other supplier and thus the USA does not gain car sales from USA consumers and they lose sales of the other products to Germans

Germany is probably not the best example for an exercise like this because many of the things that Germany buys from the USA are probably things that they have a harder time finding from others and the things that Germany sends to the USA our consumers will probably buy at a higher price

there are exceptions like machine tools, steel products that have been fabricated in a particular way ect.....there are most likely some substitutions that the USA could get from Italy or there might be some sources in the USA at a bit higher cost and for the USA some software, some engines, some highly complex tooling, some medical equipment, and other things that Germany could find elsewhere if they had to, but they would probably prefer not to

it is a much more complex and much less beneficial exercise when you are comparing two highly developed economies and outcries that have some groups of products that they are experts at making

it is a much more straight forward exercise when you are looking at a more advanced economy like the USA Vs a less developed economy that is known for "cheap labor and low cost" like China and India

in my opinion you have to look at the overall cost to your own consumers and the importance/need of the products Vs the cost to your economy of letting a company dump low cost stuff on you while they use the profits to build their economy to then compete with you in the more advanced products that they have a hard time sourcing from anyone besides your country or a few others that do not put up with their unfair trade practices

and in my opinion that is what is going on with the USA Vs China in particular they send us a ton of low cost, throw away crap that the USA could lice without for decades and that the consumer could either find elsewhere or could just not replace as often and China uses the profits from that to build their advanced industries to try and undercut the USA in those industries in the future.....while the USA sends food, raw materials, advanced machines and software, and other things that China actually NEEDS at a far greater level Vs the rubber tomahawks and stuffed plush toys and tainted dog chews that China send to the USA

so the USA should have stood up to China long ago and also forced the USA consumer to adapt to not having dollar store throw away crap that litter the yards of the rental properties they abandon when they do the midnight move 3 days before being evicted yet again......while making it more expensive for China to import the things they NEED like raw goods and advanced machines and technology that they use to turn around and further undercut our economy
Insider is online now  
Old 06-30-2018, 08:02 PM
  #3  
Admirals Club Admiral's Club Member
 
Fish'nFool's Avatar
 
Join Date: Mar 2009
Location: Anywhere but here...
Posts: 24,307
Default

Why is this in the boating forum exactly?
Fish'nFool is offline  
Old 06-30-2018, 08:05 PM
  #4  
Admirals Club Admiral's Club Member
 
Join Date: Mar 2017
Location: Tarpon Springs, FL
Posts: 2,190
Default

Those car tariff percentages are correct. China is worse at 25% (but will reportedly drop to 15% In July). Of course, nobody wants cars that are made in the US, so the overall impact is probably small. Tariff wars inevitably hurt both parties due to the reduced commerce that follows. If the administration is actually fearful of national security issues, one possible solution is to subsidize the auto industries, which would actually increase employment.

This topic should probably be moved to Dockside Chat.

Last edited by GaryDoug; 06-30-2018 at 08:11 PM.
GaryDoug is offline  
Old 06-30-2018, 08:29 PM
  #5  
Senior Member
 
Join Date: Apr 2006
Posts: 4,729
Default

I don't thing DT is really into cancelling all 'tariffs' in the true sense. US manufacturing and production isn't cost effective enough to do that in many areas. Doesn't matter whether it is due to cheap labour in Mexico or China etc the bottom line is that tariffs help protect US companies from more efficient countries or countries with a lower standard of living/wages. Zero tariffs would improve the buying power of an American person, but lead to lots of job losses eventually unless the government then supplies industry specific subsidies to support the struggling industries, but to do that you need to increase taxes and then buying power goes down again. Both tariffs and subsidies are an additional tax on the tax payers where the tax payer is in effect subsidising the relevant industries. One classic example is from a recent report that calculated 73% of the income US dairy farmers get from milk production comes from direct and indirect subsides. You could get cheap milk from more efficient countries but that would shrink the local production (and make it more efficient by the way). You could remove subsidies and put nice big tariffs on imported milk products and let the retail price rise to a level that provides a workable income to the local farmers, but the population would scream about the price of milk being too high. So what they do is take $billions from your taxes and give it to the farmers in subsidies which best hides what is going on while you get the money back in cheap milk which the more efficient countries can't compete with due to the subsidies. It's really the same as having a tariff, but politically more advantageous as the farming communities are directly dependent on the government supplying the subsidies.

Balanced tariffs like say 10% on German cars and 10% on US cars etc is really mostly just a tax on the consumers if the cars were equally desirable. Where you get a situation though where German cars have a higher desirability than many US cars, the tariffs help push locals to buy local cars based on price. In reality it would probably make sense for Trump to push for an equal tariff as high as possible so that the large number of German vehicles bought in the US goes down, and when the relatively low number of US vehicles bought in Germany goes down it affects production less than the upswing on local purchases. Advantage USA unless you are a consumer because without the competition the local made car prices will go up. But then go back to the subsidies discussion. Trump makes a great issue about the unequal tariffs on German vs US cars. What he conveniently forgets to mention is that US car industry subsidies are over twice the German ones on a per car basis. So in real terms the total 'tariff/subsidy' arrangement is much closer to equal than DT likes to mention. So if DT really wanted a level playing field he would say lets drop all tariffs and all subsidies. That isn't going to happen and of course the Germans look at the US and say that it isn't fair that the US manufacturers get all those subsidies. We need tariffs to protect us from their subsidized production costs.

The thing with tariffs is that it usually isn't a simple case of 'cherry picking' individual items from one country. Germany might have 10% on US cars and 0% on US fruit, but the US has 2.5% on German cars and 15% on German beer (don't know the real numbers). In the big picture each country is looking at what gives them the best protection for their most valuable and/or vulnerable industries, plus looking at what the other country is supplying in subsidies to each industry to try and give them an 'unfair' advantage, The US, China, and much of Europe are rife with industry subsidies, and trying to fight over tariffs without addressing the subsidies is not about being 'fair' as DT is trying to represent it. It is a political push to grab support and it is worrying what might really happen as a result. Now we are seeing Canada, Europe, China etc reacting to Trumps new 'bully boy' tariffs on their products by putting strategic tariffs on particular items that best hit at Trumps main support base states. That is the edge of a full on trade war and that is going to cause a heap of harm everywhere it it continues to escalate..
Aliboy is offline  
Old 07-01-2018, 04:03 PM
  #6  
mwn
Senior Member
 
Join Date: Feb 2013
Posts: 198
Default

Tariffs always hurt the consumer and can help the worker. Consumers pay more for imported goods and many times USA made goods as well. The prices we pay for things is based more on what we are willing to pay than the cost of getting the item to the store. If the latter price is too high we do not buy and the item dies.

Consider back in the day, the big three only made full size pickups and had nothing to compete with the smaller Japanese trucks. The government put a 25% tariff on small trucks. This allowed the big three to charge more for their full size pickups as the new Japanese prices were close(r) to the old big three prices and people needed and/or would pay more for the big truck.

Not sure how the workers that made trucks for the big 3 made out, but the consumers that bought small and full size trucks lost out big time. Eventually American workers benefited when the B3 developed their own smaller trucks but the consumers still paid more even after the tariffs were reduced [dropped] as the public had come accustomed to the new price levels.
mwn is offline  
Old 07-02-2018, 12:32 AM
  #7  
Senior Member
 
crazybeard's Avatar
 
Join Date: Aug 2013
Location: Tropico
Posts: 5,786
Default

Tariffs are both a labor protectionist strategy and a way to try and incentivize a trading partner to balance trade.

Protectinist in the case that country X produces Y. They put tariffs on Y imports some times to the point it costs much more to import Y, in order to protect their own labor force.

For example, let's say oranges have a 2000% tariff, it may make it unfeasible to import them for a price that a consumer will pay. This may be done to protect the local orange production.

For a trading "incentive" it's kind of negative, but a way to try and force a trading partner to buy some of your products. So if you produce oranges you try to negotiate down the 2000% tariff so the other country imports more of them, sometimes by raising a tariff on items you import to try and even out the level of what you produce and export vs what you import. This is only effective if you import enough of something else to make the other country give a crap.

Its almost always apples to oranges negotiation because almost nobody produces and exports enough of the same things and has enough of the same demand bidirectionally.

Some times it's just a revenue opportunity for the government.

Ultimately the consumers on both sides lose, and it doesn't do much for stimulating a purchase based economy either.

this is also why you see things like foreign car manufacturers with plants in the destination market or one of their free or lower tariff partners (Mexico and Canada in the case of the US). They import parts from the producer country and assemble the vehicle in the destination market to avoid the higher tariff on vehicles vs parts. Countries accept this because it brings in labor, investment and subsequent taxation so it's a far better deal than just a car being shipped in.
crazybeard is offline  
Old 07-02-2018, 04:55 AM
  #8  
Admirals Club Admiral's Club Member
 
Join Date: Nov 2009
Location: Tarpon Springs, FL
Posts: 7,292
Default

Tariffs are a symptom of the real problem and in this case just a negotiation tool. Spend some time asking yourself what the real problem is and why it needs to be fixed.
mikefloyd is offline  

Posting Rules
You may not post new threads
You may not post replies
You may not post attachments
You may not edit your posts

BB code is On
Smilies are On
[IMG] code is On
HTML code is Off
Trackbacks are Off
Pingbacks are On
Refbacks are Off


Thread Tools
Search this Thread