this post was submitted on 06 Apr 2025
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Explain Like I'm Five
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Say I'm from country X and I make widgets for $10 each. The US decides to put a 25% tariff on goods from country X. That means that each time I want to sell a widget in the US, I need to pay 25% of its value as a tax. If I was only making a 25% profit on each widget, that means I'm now breaking even on each widget and not making any money. That won't work for me, so I raise my widget prices to, say, $14. Now I have to pay 25% of that, or $3.50, as a tariff, which leaves me pocketing $10.50, which is about what I was making before. Widget manufacturers in the US don't have to do that, so their prices stay much lower than mine, so presumably they get more sales and the US economy is strengthened.
The problem is, the US is not a manufacturing superpower anymore, and even for the things that are manufactured here, most of the raw materials come from overseas. So the only thing these tariffs are going to do is drive up the price of everything. And once those prices are up, they're not going to come back down, even if the tariffs are removed; in my scenario above, it's likely that when I raised my widget prices to $14, all the US widget manufacturers would just raise their prices to $13 and make a bunch of extra money.
Long story short: more money getting siphoned out of the pockets of the working class.