I’m not great on economics but the concept of a tariff is that the entity importing something has to pay an extra levy in order to place in a market a given product.
This follows that an american importer of any trade goods of european origin will have to pay an extra thirty cents for each dollar such goods cost.
That extra cost will then be passed along the commercial chain, down to the final client.
So, prices go up for general public.
Meanwhile, nothing is stopping the country of origin of such products to divert their business to other countries, thus maintaining their normal activities.
Am I wrong or this whole thing is disastrous for the USA?
You’re right in how it works, except when you say nothing is stopping a country to sell elsewhere, demand/supply/market conditions do. They are probably selling to other countries as much as they can anyway, and still sell to the US as well. So when they can’t sell to the US, it won’t be easy for those companies to find other customers to take this volume. If they existed, they would have been sold to anyway.
I know this winery that usually exports nearly 95% of their production to the US. The owner spent a few decades there and made some contacts.
Last year, they had some problem with the american market and were forced to search for other venues.
They dropped their prices, opted to sell to our national market and did pretty much the same revenue they would have done exporting.
Exporting to the US is often the thirst for easy profit. Products that sell here for cents can be sold at a premium in the US, as it is the de facto luxury hungry market. Doesn’t really matter if it good; if is it expensive, it means it’s good.
Portugal mostly exports food goods to the US. I think cork, some clothing and shoes and some other items make up the basket, but in way lower quantities.
I’ve seen cheese and wine that are considered run of the mill here sold for ten times more in the US market. Which I consider theft.
This entire situation gets uglier the deeper we dig.
It is indeed bad for US businesses and consumers, and therefore for US economy in general, but as US market is so big and important, it’s also bad for countries doing business with US, including in Europe, like, for example, German carmakers or French and Italian alcohol exporters.
Though that’s only true for the first few years. Once alternatives are established and trade with America is reduced it will be less and less until America will be not interesting anymore
Unless Trump starts ww3 we will have a few more painful years of transition and then the new normal will be normal and the better deals will win, which won’t be with America.
We must not forget that it’s not only about trade. There’s also a military dimension, and if all US support to Ukraine ends abruptly and completely, then there’s a very real chance that Putin will win soon. That creates an entirely new security situation, where Russia may well attack EU countries next (like the Baltics, for example).
France and Italy could export to other countries easily or transform their cheap wine into properly aged wines and liqcours, with actual market value and product quality. Downsizing the industry wouldn’t be a bad idea, also.
Germany is already dwindling in their car industry. Could serve as a call to innovation an review of business practices.
I’m not great on economics but the concept of a tariff is that the entity importing something has to pay an extra levy in order to place in a market a given product.
This follows that an american importer of any trade goods of european origin will have to pay an extra thirty cents for each dollar such goods cost.
That extra cost will then be passed along the commercial chain, down to the final client.
So, prices go up for general public.
Meanwhile, nothing is stopping the country of origin of such products to divert their business to other countries, thus maintaining their normal activities.
Am I wrong or this whole thing is disastrous for the USA?
You’re right in how it works, except when you say nothing is stopping a country to sell elsewhere, demand/supply/market conditions do. They are probably selling to other countries as much as they can anyway, and still sell to the US as well. So when they can’t sell to the US, it won’t be easy for those companies to find other customers to take this volume. If they existed, they would have been sold to anyway.
Practical example.
I know this winery that usually exports nearly 95% of their production to the US. The owner spent a few decades there and made some contacts.
Last year, they had some problem with the american market and were forced to search for other venues.
They dropped their prices, opted to sell to our national market and did pretty much the same revenue they would have done exporting.
Exporting to the US is often the thirst for easy profit. Products that sell here for cents can be sold at a premium in the US, as it is the de facto luxury hungry market. Doesn’t really matter if it good; if is it expensive, it means it’s good.
Portugal mostly exports food goods to the US. I think cork, some clothing and shoes and some other items make up the basket, but in way lower quantities.
I’ve seen cheese and wine that are considered run of the mill here sold for ten times more in the US market. Which I consider theft.
This entire situation gets uglier the deeper we dig.
But maybe not at a price between 1 and 1.3 dollar.
It is indeed bad for US businesses and consumers, and therefore for US economy in general, but as US market is so big and important, it’s also bad for countries doing business with US, including in Europe, like, for example, German carmakers or French and Italian alcohol exporters.
Though that’s only true for the first few years. Once alternatives are established and trade with America is reduced it will be less and less until America will be not interesting anymore
One can only hope.
Unless Trump starts ww3 we will have a few more painful years of transition and then the new normal will be normal and the better deals will win, which won’t be with America.
We must not forget that it’s not only about trade. There’s also a military dimension, and if all US support to Ukraine ends abruptly and completely, then there’s a very real chance that Putin will win soon. That creates an entirely new security situation, where Russia may well attack EU countries next (like the Baltics, for example).
France and Italy could export to other countries easily or transform their cheap wine into properly aged wines and liqcours, with actual market value and product quality. Downsizing the industry wouldn’t be a bad idea, also.
Germany is already dwindling in their car industry. Could serve as a call to innovation an review of business practices.