Economics Thread

I asked grok how it's possible that us companies and consumers are not paying the tariffs. thethe keeps saying it, and thethe is always right. so im still waiting for a rational explanation that apparently the worlds best AI tool is too stupid to understand


Contrary to claims that other countries are paying the tariffs, the reality is that tariffs are primarily paid by U.S. businesses and consumers, not foreign governments or exporters. Here's how it works:
  • Who Pays Tariffs: Tariffs are taxes imposed by the U.S. government on imported goods, paid by the U.S. importer of record (typically American companies) at the time of customs clearance. These costs are often passed on to U.S. consumers through higher prices or absorbed by businesses, reducing their profit margins. Economic studies, such as those from the Tax Foundation and the International Monetary Fund, show that American firms and consumers bear the majority of the tariff burden, with estimates suggesting 70-100% of the costs are passed through to U.S. entities.
  • Why It’s Not Foreign Countries: While tariffs can make foreign goods less competitive, forcing some foreign exporters to lower prices to maintain market share, this is not the same as foreign countries "paying" the tariff. The tax is collected by the U.S. Treasury from U.S. importers, not foreign entities. Claims that other countries pay are misleading, as the direct financial burden falls on U.S. businesses importing goods and, ultimately, consumers through price increases.
  • Economic Impact: Recent tariffs, such as those imposed in 2025, have led to higher prices for imported goods like vegetables (60% from Mexico), toys (80% from China), and car parts, directly affecting U.S. consumers. For example, studies estimate Trump’s tariffs could cost the average U.S. household $1,600-$2,500 annually due to increased prices. Foreign exporters may face reduced demand, but they don’t pay the tariff itself. Retaliatory tariffs from countries like Canada and China can further harm U.S. exporters, complicating trade dynamics.
  • Why the Misconception: The claim that other countries pay tariffs often stems from the idea that tariffs protect U.S. industries or pressure foreign governments to change trade practices. While tariffs can influence foreign behavior (e.g., encouraging investment in the U.S. or seeking alternative markets), the direct cost is borne domestically. The notion of foreign countries paying is more political rhetoric than economic reality, as evidenced by economists like Milton Friedman and studies showing negative impacts on U.S. consumers and economic growth.
In summary, U.S. tariffs are paid by American importers and often passed on to consumers, not by foreign countries, despite claims otherwise. The economic burden primarily stays within the U.S., with broader impacts depending on market responses and retaliatory actions.
 
I think Grok (and many others) are missing some of the biggest problems with the tariffs due to an excessive focus on incidence.

For example, tariffs will cause resources to be redirected toward domestic production of goods that are now more expensive to import. If we had a bunch of unemployed resources sitting around this would not be an issue. But we don't. We actually have a very low unemployment rate. So if we are going to produce more thangs like toasters we are going to have to find workers to do that. Supporters of tariffs say that's precisely the point. But they need to understand we are giving up something. Those workers would otherwise be producing something else. There is a ripple effect on production and prices in every other sector.
 
nsacpi said:
I think Grok (and many others) are missing some of the biggest problems with the tariffs due to an excessive focus on incidence.

For example, tariffs will cause resources to be redirected toward domestic production of goods that are now more expensive to import. If we had a bunch of unemployed resources sitting around this would not be an issue. But we don't. We actually have a very low unemployment rate. So if we are going to produce more thangs like toasters we are going to have to find workers to do that. Supporters of tariffs say that's precisely the point. But they need to understand we are giving up something. Those workers would otherwise be producing something else. There is a ripple effect on production and prices in every other sector.
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there's also continued uncertainty that is limiting investment. I was speaking with Boston scientific last week and they explained their pausing their investments and hiring while they work to get certain exceptions for their components through DC.

unfortunately, small businesses do not have the line to the white house
 
One big problem right now is that the place a lot of people are getting their news about tariffs and the economy is social media, and because the “lying MSM” can’t be trusted with anything they say ever now, people have turned to the very influencers who assured them the MSM can’t be trusted. But as we’ve seen, those influencers just lie even harder in the opposite direction. I’m not shilling for the left or the media here, and the left sure as hell isn’t better at independent thinking, but we’ve gone from “the media is a mouthpiece for the government” to “the *new* media is telling the truth the MSM is afraid to tell you” and a lot of folks don’t seem to question that for even a moment. They’re trying to prop up these influencers as a more objective source of information because they aren’t ABC or NBC, but these people are just dumb versions of the old with even worse (bordering on non-existent) editorial standards.
 
nsacpi said:
I think Grok (and many others) are missing some of the biggest problems with the tariffs due to an excessive focus on incidence.

For example, tariffs will cause resources to be redirected toward domestic production of goods that are now more expensive to import. If we had a bunch of unemployed resources sitting around this would not be an issue. But we don't. We actually have a very low unemployment rate. So if we are going to produce more thangs like toasters we are going to have to find workers to do that. Supporters of tariffs say that's precisely the point. But they need to understand we are giving up something. Those workers would otherwise be producing something else. There is a ripple effect on production and prices in every other sector.
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If your goal is is strictly efficiency at all costs then it makes no sense to have effectively any production in the US and shift everything to lower cost areas.
 
Except we don't have comparative advantage in the tariffed products. So now we are going to be producing goods the rest of the world has a comparative advance and taking resources from industries where we do have a comparative advantage.

There is one group of winners, however. It is the consumers in countries who have eliminated tariffs on U.S. produced goods.
 
nsacpi said:
Except we don't have comparative advantage in the tariffed products. So now we are going to be producing goods the rest of the world has a comparative advance and taking resources from industries where we do have a comparative advantage.

There is one group of winners, however. It is the consumers in countries who have eliminated tariffs on U.S. produced goods.
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Why do you think we are producing the tariff products as opposed to suppliers and host manufacturing nations eating the costs of the tariffs by reducing their selling price?

When average tariffed rates are 10-15% and price increases to consumers are in the .5-1% range how is this not a win for the US?
 
thethe said:
Why do you think we are producing the tariff products as opposed to suppliers and host manufacturing nations eating the costs of the tariffs by reducing their selling price?

When average tariffed rates are 10-15% and price increases to consumers are in the .5-1% range how is this not a win for the US?
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there is a bit of both
 
thethe said:
Why do you think we are producing the tariff products as opposed to suppliers and host manufacturing nations eating the costs of the tariffs by reducing their selling price?

When average tariffed rates are 10-15% and price increases to consumers are in the .5-1% range how is this not a win for the US?
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First, I think there are a lot of cost-cutting measures and short-term losses companies are running with the assumption that sanity will prevail eventually, but these still bring with them economic impacts. It’s not other countries paying the damn tariffs, so something has to give eventually. The thing about comparative advantage and free trade is it allows for producers to meet the demands of the consumers more effectively, which ripples out across the economy. And the best part is, that efficiency allows this to happen with fewer of the consequences of a trickle down approach that Republicans still believe in on non-tariff items.
 
mqt said:
First, I think there are a lot of cost-cutting measures and short-term losses companies are running with the assumption that sanity will prevail eventually, but these still bring with them economic impacts. It’s not other countries paying the damn tariffs, so something has to give eventually. The thing about comparative advantage and free trade is it allows for producers to meet the demands of the consumers more effectively, which ripples out across the economy. And the best part is, that efficiency allows this to happen with fewer of the consequences of a trickle down approach that Republicans still believe in on non-tariff items.
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But it is the other countries paying the tariff when the majority is paid by reducing raw goods prices. That is how this whole thing works and its why we have yet to see material price increases across the board of tariffed products.

I'll use this opportunity to again remind the community that I have first hand experienced dealing with foreign suppliers subject to US tariffs. I told you all how this would play out and you laughed. Eventually we will see material prices increases. I understand that there were YEARS of frontloading purchases prior to liberation day.
 
thethe said:
And thats a great thing - Little extra competition never hurt anyone.

If some of us want to buy the more expensive American version of a product now that there may be less of a price gap then so be it.
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Some of us don’t have a fucking choice, man. If you’re an American making $15/hour, the price gap isn’t something you even get to consider because you aren’t making a choice, you’re buying the only option on the market you can afford. And because we don’t have a comparative advantage in some of the items we’re trying to increase domestic production for, that pain is just going to get worse and worse, particularly for those left behind in the job market. You keep talking about pain as if it’s an inconvenience, which for you it might be. For others, it’s the difference between having a house or not.
 
mqt said:
Some of us don’t have a fucking choice, man. If you’re an American making $15/hour, the price gap isn’t something you even get to consider because you aren’t making a choice, you’re buying the only option on the market you can afford. And because we don’t have a comparative advantage in some of the items we’re trying to increase domestic production for, that pain is just going to get worse and worse, particularly for those left behind in the job market. You keep talking about pain as if it’s an inconvenience, which for you it might be. For others, it’s the difference between having a house or not.
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And yet the doom and gloom of increased prices in line with tariffed amounts aren't happening.

Fortunately, for many Americans, their real wages are going up and tax burden is going down.
 
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