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ELI5 How does a tariff against a major trading partner effect the common pleebs?
(self.explainlikeimfive)
this post was submitted on 10 Mar 2025
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Let's say you want to sell lemonade for $1 per cup. Due to tariffs you must now pay 50 cents to sell a cup of lemonade. So what do you do about that?
Do you:
A. Take the profit loss and accept that while you still charge $1 you now only make 50 cents per cup
B. Increase costs by 50 cents so your income per cup remains at $1.
They said 'for pleebs' not business patriarchs. For 'pleebs' the answer is:
For each thing you want to buy, ask, 'is this, and and every part that makes it, from my country or one of the ones we don't have tariffs with?' If no, price increase. If yes, no change or maybe a small price increase. (if tariffs push the international product's cost higher than the domestic's, the domestic producer may choose to expand their profit margin rather than maintain previous prices)
The answer is in between depending on profit margin and market conditions...
If nobody buys your shit for 1.50... You will be forced to eat the profit margin
More than 50% of consumer spending in the US is done by top 10% of the income bracket. They are willing to pay that extra $1.50 because they're also the people who own the domestic manufacturers that are reaping massive profits by raising costs commensurate with the tariffs but not having to actually pay the tariffs.
Maybe they lose a little business from low income consumers, but they don't care that much because they make it up from the higher sale price to higher income consumers. The poor get fucked.
I think you'd be surprised at how many businesses don't like any sort of income loss. So the consumer pays the full tariff every time. The lemonade is now $1.50
If demand is inelastic... Sure... Food rent gas
But people can easily either not buy or find a substitute for lemonade lol... That's bow free markets generally work
Electronics can be used until they break!
Non tariff lemonade is $2 because it's local and "organic". And it's not gross Commie lemonade.