But why would the manufacturer or distributor lower their margins? Charity?

potato3732842 3 days ago | parent | next [-]

They wouldn't on purpose but I can tell you from experience that what happens in practice is that you don't re-quote everything or instantly change your quoted pricing based on a small fluctuations in inputs. So most companies will eat a couple percent (gross) margin here and there. So when an input cost rises margins my go to X-1, and then X-2 as it it rises more, then someone notices and changes quoted pricing to say Y+1, 2 or 3 depending on whether you're trying to get ahead of future hikes, how bad you're being squeezed, how bad you want more work, etc. But no matter what the "area under the curve" of all this change is almost always going to be negative. Sure, there's the occasional winner but in total the entire industry and economy loses.

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trevi 3 days ago | parent | prev | next [-]

Price elasticity of demand (=sensitivity to price changes). If the seller is afraid that higher prices will significantly impact sales (people won't buy the product or buy alternatives), it might accept a lower margin in order to maintain the volume.

Also market competition can be a factor: if competitors are not raising prices (or by smaller amounts), you might lose market share.

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closewith 3 days ago | parent [-]

The drop in demand for staples you're talking about is quite literally the poorest people eating less, using fewer basics, lowering their quality of life further.

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somenameforme 3 days ago | parent [-]

As of 2016 (first search result) 90% of food/beverage is domestically produced = no tariffs. [1] The big goal with the tariffs, outside of gaining leverage on other countries, is to motivate domestic production and alternatives. Without tariffs it simply isn't realistically possible to compete in many industries because other countries have cheaper labor and less costly regulations.

Of course the practical problem with this playing out in increased domestic production is that it's reasonably likely that in 2028 the tariffs will get rolled back, and any company that was depending on them to survive will die. That's a large amount of uncertainty for any industry where there's a significant income investment required to get going.

[1] - https://www.ers.usda.gov/data-products/charts-of-note/chart-...

	▲	closewith 3 days ago \| parent \| next [-]
		Domestic food supply is still subject to tariffs because many of the inputs are. Agricultural machinery, parts, chemical feedstocks. Not to mention that tariffs on directly imported goods reduce the lowest earners' ability to pay for domestic products. If the goal was onshoring too benefit the population, it would be coupled with a strong wealth redistribution to the least wealthy to allow them to buy domestic goods. But that's not the goal.
	▲	tart-lemonade 3 days ago \| parent \| prev [-]
		>90% of food/beverage is domestically produced = no tariffs That's not true, even for items which undergo relatively little processing like milk: 1. Cows need feed, and in the US this is mostly corn. This corn is mechanically harvested, shucked, and transported. 2. Cows are milked by machine. 3. This milk is then transported to a larger processing facility where it gets filtered, clarified (fat removal for 2%, skim, etc), pasteurized, homogenized (fat is evenly dispersed), and bottled in a blown plastic jug. 4. After bottling, the milk gets palletized and trucked to grocery distribution centers, which will re-palletize it for shipment to individual stores. At every step of the way, we use machines that require frequent maintenance and whose supply chains rely extensively on imported parts. On-shoring all of this would be expensive and risky both because Trump flip-flops so often and because our next administration may just reverse the tariffs.

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Joeri 3 days ago | parent | prev [-]

In the short term: fear of reprisals from Trump, as he clearly warned them not to raise prices. In the long term markets find a new equilibrium, as they always do when a new tax is imposed, and that is probably going to be a combination of lower margins, higher prices for the consumer and lower prices for foreign suppliers.

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Paul_Clayton 3 days ago | parent | next [-]

"higher prices for the consumer" can include lower value at the same price. Size reduction seems a common method for certain commodities. This may result in reduced consumption (e.g., a consumer buying one package of ice cream every other week), as well as increase customer dissatisfaction when the change is noticed, and it can increase packaging cost per unit weight/volume.

Other ways of reducing value are possible such as reducing quality control effort, reducing quality of inputs, and reducing manufacturing costs in ways that are known to reduce product quality.

Pushing costs to effectively underregulated externalities can also avoid price increases.

It is also sometimes possible to increase efficiency. Even a long term commodity can have potential for efficiency improvements that were considered not worth exploring under stable pricing pressures. (I suspect value reduction is easier and much faster than efficiency improvement.)

Sadly, reducing value can have a disproportionate cost to consumers. Reducing manufacturing costs for a Watchman's boots by 20% may reduce the lifetime of such by 30% and reduce the quality of use by 50% (which may be related to Samuel Vimes' theory: https://en.m.wikipedia.org/wiki/Boots_theory ).

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NekkoDroid 3 days ago | parent | prev [-]

> fear of reprisals from Trump

Realistically, what's he gonna do? Shut down the company, which he oh so desperatly wants in the US? Tax them more, driving their cost up more?

	▲	ModernMech 3 days ago \| parent \| next [-]
		For starters, he could do what he did with CBS: threaten a potential merger. Or he could do what he did with Musk: threaten to revoke citizenship of the CEO or anyone on the board if they're foreign. Or do what he did with Harvard and Columbia: threaten to pull grants and revoke foreign visas of workers. Or do what he did with big law firms: threaten to pull security clearances. Lots of options.
	▲	DrillShopper 3 days ago \| parent \| prev \| next [-]
		He's already weaponized the IRS, DOJ, and FTC, so there are a lot of ways he can fuck you for not bending the knee.
	▲	actionfromafar 2 days ago \| parent \| prev [-]
		Realistically, many companies are going to shut themselves down because their margins will be gone.