(C) Daily Kos This story was originally published by Daily Kos and is unaltered. . . . . . . . . . . WTF???? Holy $hi# !!! Wow!! [1] ['This Content Is Not Subject To Review Daily Kos Staff Prior To Publication.'] Date: 2024-11-25 The stupid burns! Because so many people in marginalized communities would be hurt first and worst, we do not want the full Trumpidity experience! It will be terrible for the country. And Trumpers and other dead-enders on our side don't actually learn from experiences. They are told not to touch the hot stove, they touch it, get burned, and then argue for touching it again. The priority of the paradigm and they are constantly propagandized with the result that they can't learn. Nevertheless, if some of the very bad people who voted for Donald Trump got the full experience including the severe negative effects on them personally, I am afraid that I won't be able to generate much sympathy or compassion for these people. I'm going to address this with some simple examples. Trump supporters have said that the Biden administration kept some specific targeted tariffs, so across the board tariffs against China are okay. We're not saying that no tariffs are appropriate. We're saying that across the board tariffs against China are inflationary and a bad idea. Here's an example where a specific targeted tariff is appropriate. A Chinese manufacturer faces very high infrastructure costs in order to manufacture their products. However, the Chinese government decides to cover the cost of the infrastructure. Therefore, the Chinese company can sell their product in the United States for a much lower price than their international (including in the United States) competitors. Their prices are artificially low because of this unfair advantage. That's called dumping and it's clearly unfair. In this type of situation, a specific targeted tariff is appropriate. Another example would be with patent violations. Trump supporters have said that the across the board tariffs against China are no big deal because they will buy from non-Chinese companies. These people don't realize how many parts and products in the United States are manufactured in China. If they tried to go to another non-Chinese company, assuming that they weren't driven out of business because of the lower prices, even after the tariff the Chinese product would be less expensive because the infrastructure costs and wages are that much more outside of China. So, choosing an alternative to Chinese companies would normally cost more even after the tariff. Either way, their price that they pay would go up. Either it would go up because the non Chinese company faces higher infrastructure costs and pays higher wages or it would go up if they stayed with the Chinese company because of the tariff. Now let's consider an American company, ABC, that makes widgets. They sell their widgets at $10. There is an alternative to the widget available at $16 that all customers would choose if they were the same price. Demand isn't perfectly inelastic. Demand decreases as the price increases. However, there are some customers that are companies that have to have the widget for the product that they make. The company sells 20 widgets at $10. It costs them $4 to make each widget. So, their marginal profit is $10-$4=$6 per widget sold. Using dimensional analysis 20 widgets sold *$6 profit per widget sold yields total profit of $120. They must earn that much profit for it to be worth staying in business. Now the tariff is $2 and it's applied to the Chinese part that the American company, ABC, relies on. So, now if they keep the same price point, then their marginal profit becomes $4 profit per widget sold as $10-$6=$4. Since they didn't increase the price, their sales would stay constant at 20 widgets. So, their total profit would drop to $80 as 20 widgets sold * $4 profit per widget sold= $80. However, again, they must earn $120 total profit for it to be worth staying in business. So, they must raise the price point. Suppose that they only raise it by the amount of the tariff. That won't work because demand isn't perfectly inelastic; they lose sales as they increase the price. If they sold the widget at $12, then their sales would go down to 17 widgets. So, their marginal profit would remain at $6 as $12 - $6 = $6 and their total profit would be 17 widgets sold multiplied by $6 profit per widget sold which gives us $102 total profit. That's not enough to justify staying in business. So, they would need to increase the price point enough so that the new marginal profit is enough to make up for the reduction in sales. So they would determine how much in sales they lose at each price point and how much more in marginal profit they make to see if the increase in the marginal profit makes up for the reduction in sales. Suppose they sell 14 widgets at $15. Remember they have a certain amount of customers that are companies who absolutely must have either the widget or the widget alternative in order to make the product that their company makes. So, they lose sales at first, but then there are those customers who must have it. Again, they must keep the price point below $16 or they would lose all their sales to the widget alternative company. Now their new marginal profit is $9 per widget sold because $15 - $6 = $9. Their new total profit is 14 widgets sold * $9 profit per widget sold = $126. $126 is sufficient for them to stay in business. This is an extremely simple example, but it does effectively show why across the board tariffs against China are inflationary and are a bad idea. This is before any retaliatory tariffs from China against America and American companies. [END] --- [1] Url: https://dailykos.com/stories/2024/11/25/2288606/-WTF-Holy-hi-Wow?pm_campaign=front_page&pm_source=trending&pm_medium=web Published and (C) by Daily Kos Content appears here under this condition or license: Site content may be used for any purpose without permission unless otherwise specified. via Magical.Fish Gopher News Feeds: gopher://magical.fish/1/feeds/news/dailykos/