> the consumers paid the price of the tariffs. These refunds are going to businesses who just passed the price along

This story is often repeated, especially by businesses advocating against taxes, but transparently false if you think about it: Taxes and tariffs are costs for a business, no different than an increase in the cost of hops for Budweizer, or an increase wholesale cost of M&M's for the corner store.

When hops' cost increases, Budweizer doesn't just pass it along to consumers; the corner store also doesn't just raise the price of M&Ms. Everyone knows that if you raise the price, fewer people buy your beer/candy and your profits may drop overall, while your scarce assets (money) will be sunk in products sitting on the shelves when you need those assets elsewhere. They can't just raise prices arbitrarily: if Budweizer charged $20/can they'd have zero profit.

As we know well, some companies even sell products at a loss because that is the best outcome for their profits - e.g., car manufacturers, rather than have a hundred million in assets 'lost' indefinitely to unsold cars, and having no pricing that is more profitable, will sell at a loss to get what they can out of it. The clothing store puts last season's unsold clothes on sale around now.

In economics the tradeoff between price and quantity sold is called the demand curve. There's a theoretical point on the curve, hard to identify precisely in reality, which maximizes your profit.

So when costs increase, businesses still want to maximize profits: They decide how much of extra cost to pay directly out of their profits, and how much to raise the price and have consumers 'pay' for it. The consumers don't always go along with the plan: For products that are easy to forgo, such as M&Ms, consumers won't pay much more and businesses tend to eat cost increases. For products that are more unavoidable, such as gas for your car, consumers are compelled to pay more (until they buy more fuel efficient cars, or take a bus or ride a bicycle).

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CrazyStat 3 hours ago | parent | next [-]

The CBO estimates [1] that foreign exporters bear 5% of the burden of the tariffs, with American consumers bearing the remaining 95%:

> [T]he net effect of tariffs is to raise U.S. consumer prices by the full portion of the cost of the tariffs borne domestically (95 percent)

This is a serious document written by a bunch of serious economists. You can find a list of them at the bottom of the page. That you have written their conclusion off as "transparently false" should give you pause.

[1] https://www.cbo.gov/publication/62105#_idTextAnchor050

	▲	mmooss an hour ago \| parent [-]
		> you have written their conclusion off as "transparently false" I didn't say that. I said that the common argument that tax/tariff increases are always passed along 100% to consumers is transparently false. And contrary to your criticism, the cited paper agrees with my claim (in this case, while my claim is general): "In CBO’s assessment, foreign exporters will absorb 5 percent of the cost of the tariffs, slightly offsetting the import price increases faced by U.S. importers. In the near term, CBO anticipates, U.S. businesses will absorb 30 percent of the import price increases by reducing their profit margins; the remaining 70 percent will be passed through to consumers by raising prices." It goes on to say that other businesses, whose costs haven't increased, will raise prices - which is not at all 'passing along costs to consumers' but a different dynamic - and that the combined two dynamics yield the overall consumer impact equal to 95% of tariff costs: "In addition, U.S. businesses that produce goods that compete with foreign imports will, in CBO’s assessment, increase their prices because of the decline in competition from abroad and the increased demand for tariff-free domestic goods. Those price increases are estimated to fully offset the 30 percent of price increases absorbed by U.S. businesses that import goods, so the net effect of tariffs is to raise U.S. consumer prices by the full portion of the cost of the tariffs borne domestically (95 percent)." I think the tariffs are a big mistake but the argument I was addressing - if you tax businesses then consumers effectively pay the tax - is widespread disinformation.

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0xcafecafe 3 hours ago | parent | prev | next [-]

I ordered a soccer team jersey from UK which cost $100. I had to shell out $75 in tariffs. So yes while what you are saying might apply to businesses, there is a real cost paid by consumers as well.

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wnc3141 3 hours ago | parent | prev | next [-]

Both can be true. On competitive environments it's harder to pass along costs to consumers, but when a supply pressure is unilaterally applied the competitive pressure to eat the increased costs goes away and is more easily passed along to consumers.

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mothballed 4 hours ago | parent | prev [-]

There's a bit of truth to what you say, but also truth in the fact ultimately the consumer pays for everything. You're right that in effect the business might absorb the loss to profit, but ultimately ~100% of the revenue is from receipts from customers in the business model you proposes of things like selling a simple business of merely producing and selling M&Ms.

Thus both of you are really right. The tariff is paid 100% by consumer receipts if you track the flow of money, but this might also still be reflected in reduced profits. The actual flow of money might be $X revenue from customers, out of the $X paid from customers $Y is taken out for tariffs. $Y comes from the dollars received from customers but still reflects lowered potential profit if $X rose by less than $Y after tariffs started.

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mmooss 2 hours ago | parent [-]

That's theoretical (and wrong: businesses' assets come from many places besides consumers, especially from investors) but meaningless to the question in this thread:

Tariffs do not necessarily increase prices for consumers, especially not at a dollar-for-dollar rate.

	▲	mothballed 2 hours ago \| parent [-]
		>(and wrong: businesses' assets come from many places besides consumers, especially from investors) You were the one that presented the dichotomy of receipts from customers and diversions of profits. Then when I used your own framing, by using the exact same two variables, you switched the game and object to not including the investors. This is absolutely hilarious, as you're objecting to the very foundation you outlaid. >Tariffs do not necessarily increase prices for consumers, especially not at a dollar-for-dollar rate. The 'question' was twofold. Whether consumers pay it. And whether tariffs increase price for consumers. It can be true that the consumer pays ~100% of the tariff, yet the price doesn't rise as much as tariffs. It's still the consumers paying, they're just paying more to tariffs and less to profit. So you're both right, and your failure to acknowledge that is why your comment got grayed out. Had you acknowledged that, it would have been a very easy 'win' for you and close out of a decent argument.