There’s a lot of economic ignorance on X.
Generally, yeah, but more so lately.
I see plenty of wokies moaning about how Trump’s tariffs will do nothing but make imported goods more expensive.
“The consumer ALWAYS pays ALL the tariff!” is some hardcore economic illiteracy. They reason it out as though there’s only one company selling one product to one customer, instead of, you know, a marketplace.
Let’s say China sells shirts to an importer at $20 a pop, who then sell them to customers at $40 each. Then a tariff comes along – $10 per shirt.
“The customer will pay that ten dollars!” shrieks the purple-haired gender studies graduate.
But let’s reason it out:
If an American store starts selling the shirts at $50, any of their competitors could take the hit, sell them at $40 and earn their rivals’ customers. They either make up the profits in volume or treat it as an investment in their domination of the marketplace.
Meanwhile, another company sells American-made shirts for $75 but markets them as the patriotic choice that creates local jobs. Or as the quality alternative.
Meanwhile, yet another American store points out to the Chinese manufacturers that the manufacturers need the US market. They negotiate a deal where the manufacturer pays the tariff to keep access to a lucrative market.
Meanwhile, yet another company sees a gap in the market – no one is making American shirts that companies can sell for $40. They invest in figuring out how, then carve out a chunk of the market for themselves.
Meanwhile, yet another company anywhere in the world figures out how to sell shirts to American companies for half the price of Chinese companies. Cost-sensitive importers gravitate towards them.
“The consumer ALWAYS pays ALL the tariff!” is true if and only if there’s no competition in the market. It’s true for toy models where one company sells one product to one customer. It doesn’t hold in the real world.
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