Tariffs

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storewanderer
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Tariffs

Post by storewanderer »

Without going into the political side of it, I am wondering exactly how these new tariffs will work.

For instance 25% tariff on a shirt from China. If the shirt has a wholesale cost of $3 and a retail price of $30, is the tariff $0.75 (based on the wholesale price) or based on the retail price?

I know markups on these items vary widely but some items have a very, very low wholesale cost and a much, much higher retail cost.

I am thinking of this solely from the perspective of "how much to expect prices on things to rise" with this.

And I don't even know if a shirt is one of the categories subject to the tariffs.

Also I wonder how the tariff works if I order one of the covered products direct from China on a site such as Ali Express.
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Re: Tariffs

Post by submariner »

This is a pretty good explanation. Economists note the tariffs would be on the wholesale price (this article is from last year, and speaks of the original proposed 45% tariff, but the scale of economy is basically the same).

https://www.palmbeachpost.com/business/ ... lbhjblq1H/
“Fifty-five percent of the retail price is accounted for by domestically-provided services like transport within the U.S., store rental as well as and margins accruing to wholesalers and retailers,” Liu said. As a result, if the import price were to rise 45 percent and all other costs remained the same, the retail price would increase by only 20 percent.”

But the increase would likely be less than that because the mark-up on Chinese goods is higher than other imports, Liu said.

“This suggests that U.S. retailers would have room to absorb some of the increase in import prices in their margins,” Liu said. “After all, companies like Apple don’t set retail prices as a simple mark-up of import costs.”

As a result, the tariff would likely only drive up U.S. retail prices by an average of about 10 percent, according to a report released last year by Capital Economics.
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Re: Tariffs

Post by babs »

Most electronics products have little margin, especially items like TVs that are more like commodities. Apple products are different since there is a lot of margin built in. Apple could absorb the tariffs but all those flat screens you see at Costco are going to go up in price significantly.

Much of the apparel business is located elsewhere in the far east. China has become too expensive for apparel manufacturers.
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Re: Tariffs

Post by Super S »

babs wrote: September 21st, 2018, 8:25 am Most electronics products have little margin, especially items like TVs that are more like commodities. Apple products are different since there is a lot of margin built in. Apple could absorb the tariffs but all those flat screens you see at Costco are going to go up in price significantly.

Much of the apparel business is located elsewhere in the far east. China has become too expensive for apparel manufacturers.
I think chains like Walmart and Target are in a position where they can absorb some of the cost. But the independent merchants are at the mercy of their suppliers.

This will have more of an effect on big ticket items like vehicles. Volvo and Buick already have models for sale in the U.S. that are built in China.

There are some categories of products where it is nearly impossible to NOT buy something made in China though, so this will have an effect.
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Re: Tariffs

Post by babs »

Super S wrote: September 21st, 2018, 9:36 am
babs wrote: September 21st, 2018, 8:25 am Most electronics products have little margin, especially items like TVs that are more like commodities. Apple products are different since there is a lot of margin built in. Apple could absorb the tariffs but all those flat screens you see at Costco are going to go up in price significantly.

Much of the apparel business is located elsewhere in the far east. China has become too expensive for apparel manufacturers.
I think chains like Walmart and Target are in a position where they can absorb some of the cost. But the independent merchants are at the mercy of their suppliers.

This will have more of an effect on big ticket items like vehicles. Volvo and Buick already have models for sale in the U.S. that are built in China.

There are some categories of products where it is nearly impossible to NOT buy something made in China though, so this will have an effect.
Volvo is moving production of US bound vehicles out of China and back to Europe. That's why there is currently a long wait time for the XC40 as they are in the middle of moving production capacity. Companies that have the ability to move production around will do so. Mexico might end up as a beneficiary but the problem is that the quality coming out of Mexican manufacturers is poor.
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Re: Tariffs

Post by storewanderer »

babs wrote: September 21st, 2018, 12:07 pm
Super S wrote: September 21st, 2018, 9:36 am
babs wrote: September 21st, 2018, 8:25 am Most electronics products have little margin, especially items like TVs that are more like commodities. Apple products are different since there is a lot of margin built in. Apple could absorb the tariffs but all those flat screens you see at Costco are going to go up in price significantly.

Much of the apparel business is located elsewhere in the far east. China has become too expensive for apparel manufacturers.
I think chains like Walmart and Target are in a position where they can absorb some of the cost. But the independent merchants are at the mercy of their suppliers.

This will have more of an effect on big ticket items like vehicles. Volvo and Buick already have models for sale in the U.S. that are built in China.

There are some categories of products where it is nearly impossible to NOT buy something made in China though, so this will have an effect.
Volvo is moving production of US bound vehicles out of China and back to Europe. That's why there is currently a long wait time for the XC40 as they are in the middle of moving production capacity. Companies that have the ability to move production around will do so. Mexico might end up as a beneficiary but the problem is that the quality coming out of Mexican manufacturers is poor.
Quality seems to be an issue with some of the "alternate" sources, or making things in the US. Sad to say.

It seems like almost all of my clothes are Made in China, except some denim of various labels that are Made in Mexico and a few Kroger clothes that are made in Sri Lanka and Pakistan... most of my clothes have come from Dillards, Sears, Kohls, or Kroger.
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