r/WallStreetbetsELITE • u/s1n0d3utscht3k • 24d ago
MEME White House once again responding to who pays for tariffs:
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u/omega_grainger69 24d ago
I move for a vote of no confidence.
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u/Jatski23 24d ago
Damn, where’s the nearest Sith Lord when you need him? Palpatine!
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u/Celac242 24d ago edited 24d ago
The importer is responsible for paying the tariff 100 percent of the time, however there is some nuance here. I have worked heavily in international business and want to share some perspective since most people only learned what tariffs were recently.
One technicality that is not usually mentioned as a nuance in this conversation is INCOTERMS, which stands for international commercial terms. These are globally recognized rules that define the responsibilities of buyers and sellers in international trade transactions. In the case of import duties, the party responsible for paying them depends on the specific INCOTERM used in the transaction. For example, under the DDP (Delivered Duty Paid) INCOTERM, the seller is responsible for all costs, including import duties, before delivering the goods to the buyer. In contrast, under the FOB (Free on Board) or CIF (Cost, Insurance, and Freight) INCOTERMS, the buyer typically pays the import duties upon arrival in the destination country. Although the responsibility for payment can shift depending on the agreed-upon terms, the fundamental reality remains that someone, whether the buyer or the seller, must pay the import duties to the United States government. This inevitably leads to higher costs, which are often passed down to consumers in the form of increased prices.
For the record, I think Trump’s policies here are reckless and very stupid. I voted for Kamala but can say there are some cases where the seller pays the import tariff on behalf of the buyer. However, the end result is still higher prices.
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u/yousirnaime 24d ago
Additionally - the ability to compete in a market as a tariffed country, against non tariffed countries, will mean that the tariffed business will have to lower their prices (or increase value elsewhere) to offset the cost of tariffs.
"The buying country pays the tariffs" is a stupid argument, when you can just buy from non-tariffed countries for better prices.
That's why these policies hurt the tariffed countries.
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u/deadalusxx 24d ago
It also depends on which country, like they need to tariff China a ton more before it will have any impact on price since at 40% China will still be cheaper then your local goods.
Secondly something a lot of people don’t know is that tariff has loopholes like where is shipped and also %consider made in a country. What a lot of companies do now to not get tariff is that if the goods is considered made in x country if the product is over 40% made it x country. They will start the production in x country and then finish it in theirs. Once they get the “made in X” they just ship through a non tariff country to by pass the tariff completely.
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u/therealvanmorrison 24d ago
If I’m selling widgets to America and the tariff means Canada can only sell widgets at $x, my price just went up to $x-$1.
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u/yousirnaime 24d ago
If there are only two widget companies, yes
If there’s any other competition globally, you two keep your prices at market and the Canadian company gets wrenched, eats the cost, or moves the production to a non tariffed nation - likely America
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u/therealvanmorrison 24d ago
You’re still removing an entire supply, which shifts the curve. There really isn’t a universe where this has no upward pressure on prices. Which is why everyone engaged in businesses impacted by it has been against tariffs for a hundred years.
Also tariffs are also in place against the EU, China and Mexico. Obviously Don is gonna remove tariffs and sanctions against America’s true ally Russia in due course, so that will help with potash. But the developed world and what it sells to America is, by all we can foreseeably predict, going to be tariffed.
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u/IndubitablyNerdy 23d ago edited 23d ago
In general who pays depends on a lot of factors such as for example, price elasticity of that good, availability of alternative suppliers, market concentration of the alternatives (if they have enough market power they will just increase the price and not production reaping higher profits thanks the tariffs), global supply chains of that commodity are also a factor in general the world markets are integrated (although Trump is doing his best to dismantle that) and overall demand for some good does not go down due to tariffs in one country nor supply is increased so the various actors will just look for new partners, at a cost, but then the market renormalizes (this is happening in some form with russian oil and gas).
More often than not though tariffs tend to be inflationary even if a portion of the cost is paid by the supplier. It's a game where both the consumers and the foreign suppliers lose the only ones that benefit are (and in some cases just in theory) local producers or foreign ones that are not subjected to tariffs.
Tariffs on commodities or components needed for other products also in general tend to be more of a problem for the importing country since their local industry need that kind of stuff to operate (although again, if they have access to alternative the market might rebalance, still for some commodities there is the matter of existing infrastucture, like for example again with Russian gas pipelines).
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u/ElevatedAngling 24d ago
Regardless of which side actually pays it effects the price of the transaction and ultimately the goods on the buyers side. Buyer is paying for it via higher price, this explanation is just lipstick on a pig to confuse people who don’t understand trade
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u/Celac242 24d ago
I mean I said pretty clearly in my explanation that it affects the final price and is bad in this case. Not sure where you’re coming from here but to say it is always paid by the buyer is not factually correct
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u/DreCapitanoII 24d ago
Your explanation could have been one sentence: sometimes the seller pays but they just increase the price to account for it.
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u/Celac242 24d ago
People don’t understand incoterms obviously so it was actually important to spell it out. People hopelessly don’t understand tariffs and it’s important to spoon feed it
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u/ThinkPath1999 23d ago
There's no reason for the layman to understand incoterms. And you're being pedantic, because it doesn't matter who technically pays it, at the end of the day, the importer is paying it. If you buy something DDP, does that mean that you pay less? No, of course not. You pay pretty much exactly what you would have paid if you bought it EXW, it's just a matter of timing. Who cares who pays what when? The point is that the cost of the tariff gets passed onto the importer and then onto the consumer.
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u/Celac242 23d ago
It’s not pedantic to be educated lmao. I even added hella disclaimers that I think trumps policies are very bad. But it’s factually true that the seller/exporter does pay the tariff sometimes and if we want to not sound ignorant or get dunked on we have to be educated. Grow up lol
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u/avatarOfIndifference 23d ago
The importer pays it if there is a demand for a good AT THAT PRICE. If the passed on tariff cost makes something too expensive…people go elsewhere like an internal supplier
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u/Celac242 23d ago
If an internal supplier exists lmao…
Definitely does feel like watching a car crash in slow motion
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u/pinetar 24d ago
But that's not really correct either. The proportion the seller eats as lost profits and the buyer pays in additional price depends heavily on a number of things including the elasticity of demand and supply.
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u/grackychan 24d ago
Also depends on the currency pair and whether the exporting country’s currency is weak or strong vs the tariffing nation.
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u/WhenImTryingToHide 24d ago
SO nice to see someone actually talk sensibly about the details. I understand tariffs fairly well for a number of reasons, but I have to admit, even I find myself getting confused, and asking myself, what ARE tariffs good? So I can only imagine people who are completely ignorant about international trade and how tariffs work.
I always say to people, if you want to understand how Tariffs work, just look at any Caribbean country and how much a car costs there. Almost all put taxes up to 200% on the import of vehicles. The reason they do this varies from country to country, but the result is the same,
Prices are sky high
Demand for them is controlled (which can be good for instance where the country just does not have the infrastructure in place as yet to supply a flood of vehicles)
The countries do not start making vehicles. They simply do without.
The US benefits immensely from the way world trade is currently set up, and, if leaders feel that trade is imbalanced, then there are so many other tools in the toolkit to help fix this. if it even needs fixing.
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u/crankbird 23d ago
I probably did it far less than you, but when we pushed out goods DDP, the price was the same as FOB plus the duty we paid (along with all the other processing stuff), this would apply in pretty much any case where the vendor has the leverage to set the price via some level of differentiation. The only case I can see where that doesn’t apply would be fungible goods where there is limited global demand and there is non-dutied supply ready to roll.
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u/Celac242 23d ago
Yes same here. The price for the goods itself almost never changed in the commercial invoice because the value of the goods was very relevant to how tariffs were applied, insurance, etc
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u/aersult 23d ago
You're right, but nearly missing the point
the end result is still higher prices.
This is what 'the buyer/consumer ends up paying' means in all these statements.
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u/Celac242 23d ago
Do you think I don’t understand that lmao? I literally said that in my first comment. You guys are way oversimplifying things and attacking me just to help you understand this topic further because Americans don’t seem to know anything about tariffs
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u/aersult 23d ago
Your post was needlessly pedantic and will only serve to confuse people unfamiliar with tariffs. They will read it and say "well Donald will just use the one where the Canadians pay then! HA HA!"
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u/Celac242 23d ago
This is an outrageous accusation. People that say the buyer always pays is just as ignorant as someone saying the foreign country always pays. You’re coming off as an ignorant American right now
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u/aersult 23d ago
Yes, ignorant people are ignorant. That's my point. I'm not saying you're wrong, or that your comment doesn't have a place in some conversations. But a top-level comment on this thread isn't the place.
Ignorant Americans will ignore the nuance you've given and take from it a snippet that suits their viewpoint. They will latch on to the very small part where you mention that Canadians physically pay for some forms of tariffs and they will (willfully or otherwise) ignore the part where the American firm ends up paying more and passing that cost to the consumer. They will say 'see! Canadians pay!' regardless of the real implications
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u/Celac242 23d ago
Ok so you don’t care about understanding what you’re even talking about even when there’s a broad disclaimer saying this will raise prices, understood lmao
Got it that sharing more nuance about the subject is being pedantic. You’re missing the point I think
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u/DayThen6150 24d ago
Bottom line goods are always paid for (duty taxes and fees ) included in the price by the Importer. Whether or not the technical payment is made by the exporter for the duties they are reimbursed in the price to the importer.
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u/Celac242 24d ago
This isn’t actually true lol sometimes the exporter pays the fee and that’s as far as it goes and the price of the goods itself doesn’t change. Again I think Trump is an idiot and it will raise prices but you have to understand there’s plenty of instances where the exporter pays the tariff and that’s part of the commercial agreement.
Not trying to split hairs but you’re not factually correct by making generalizations like this
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u/avatarOfIndifference 23d ago
You guys are almost there…if prices are too high for a particular good or service….what do consumers do…or don’t do?
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u/yephesingoldshire 24d ago
What I want to know is how the White House plans to control all the customs fraud that’s probably going to happen if it keeps tariffs in place. I.e. customer and supplier would both be in on it, regular shipment of 100k worth of product, commercial invoice would only say 10k and a note that it’s defective or scrap or out of tolerance. Duty paid on 10k. Vendor sends customer a separate invoice that customs never sees for 90k for “engineering fees”.
I doubt the customs agents are out there with calipers checking tolerances on steel bar or doing chemical analysis on steel to check if it’s A36. They don’t know wtf they’re looking at half the time.
If tariffs stay in place I predict we will see a lot more customs fraud on a massive scale that rivals all the fraud we saw during Covid with the ppp loans.
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u/cscrignaro 24d ago
From were I understand, if I were to go buy something in the states and bring in back to Canada the Canadian border guards pull me in and make me pay duties on it. What I don't understand is how or why that money would ever get remitted to the states. So I don't understand at all how the US benefits and makes money from tariffs. All it seems to do is force money to stay within the states while deterring foreign money.
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u/the_tethered 24d ago edited 24d ago
You're not wrong. What some people don't realize that tariffs aren't meant to make the government a significant amount of money. They are intended to discourage businesses from doing business with a certain country by making it more expensive for them to import goods from that place.
Most businesses will cut ties with their suppliers to keep their costs down and go elsewhere for a cheaper product they can continue reselling for the largest margin, either domestically reselling with another foreign country.
It doesn't actually force any money to stay within the country, it just discourages trade with the country whose imports have tariffs attached.
Separately, if the exporting country is desperate to do business with a large buyer like the United States, adding a tariff can force the exporting country to lower the cost of the product to maintain the flow of buyers for their product. This is more common with countries that control a large portion of the global supply of whatever that product is - minerals,
This is why we have trade agreements instead. Tariffs discourage global competition and limits the supply pool by passing along the cost to the importing businesses, who pass the cost along to their customers, who likely can't afford the increase. Tariffs always benefit the rich in the private sector - they are a drop in the bucket as far as providing income for the importing country's government. Trade agreements are much more lucrative, which is why most of the civilized world has moved away from tariffs and toward trade agreements.
Tariffs are like checkers in their simplicity, whereas trade agreements are more like chess in that they require more knowledge and investment, finesse and strategy, which makes them worth more. Players can move sideways or backwards without breaking any rules, allowing for more freedom and finesse.
It is unlikely that anyone who doesn't know how chess pieces work would propose a game of chess, but can confidently propose a simple game of checkers because it is easy to understand and all the pieces behave the same. This, of course, isn't about board games.
Because of the way tariffs behave, it's not far reaching to make the argument that they are inherently evil by hindering progress and collaboration and actively make the world a worse and more hostile place for everyone.
Edit: added context, examples and clarity
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u/redshirt1972 24d ago
Right. The only thing this helps is people not buying imports because they’re too expensive now. Yes it does hurt the country trying to export their goods but it also hurts the consumer here because either they have to buy cheaper American products or more expensive foreign products.
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u/r2k-in-the-vortex 24d ago
Its a wonder some importer isn't raising stink about why they have to pay tariffs when president has clearly said they don't.
Its like the ideal play. "News at eleven: deep state corrupt customs demanding tariffs from importers when they should clearly send the bill to exporting country."
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u/HawaiianTex 23d ago
Still hyperventilating and being a hypochondriac since 2015. Savor the flavor!!!
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u/Mundane_Flight_5973 24d ago
That really depend, if you take a country really dependent on the export to the us, they will take part of the tariffs and not pass all of them to the consumer
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u/trudat 24d ago
If that’s the case, you don’t need tariffs and just demand a lower price.
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u/Mundane_Flight_5973 24d ago
How do you demand a lower price, you can’t meet 1000 ceos and demand lower prices, the will laugh in your face, with tariffs you solve the problem. If you take Canada, it is true that it will damage the us but Canada 25% of gdp is dependent on the us so with reciprocal tariffs they will fuck themselves even more.
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u/IcarusOnReddit 24d ago
How do you demand a lower price, you can’t meet 1000 ceos
As someone in sales, this is what purchasers do all day, every day, on everything they buy. Not usually to the CEO.
Canada would rather live in poverty than bow to the US. You guys are crying over eggs. When we cutoff potash your corn will be expensive. Then everything will be expensive.
Stop trying to figure out how your cult leader is smart when everyone with a brain is telling you he is not.
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u/denewoman 24d ago
Trump and his MAGA troops underestimated - like grossly underestimated - how his trade war threats and actual tariffs have galvanized the country. "Buy Canadian" and the resultant American goods (and services) boycotting has not only put a big unexpected dent in places like Kentucky, but this boycott has catalyzed to many other countries "Buying Canadian" and boycotting American companies and imports.
Sure standing up to a loud mouth bully is scary, but we did it and we know we are going to feel some pain yet almost every sane non Maple MAGA I know is like "fuck this shit" and we are buckling down.
Soon the effects of the tariffs are going to hit everyday Americans. They can thank Trump, but he will blame Canada. That's expected and we will ride it out while Americans start getting squeezed on eggs, food safety and aviation mishaps continuing, prices rising on house renovations and buildings, and Musk attacks on social security and other social programs.
Americans are already divided. Canadians are not divided and are further galvanizing.
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u/Mundane_Flight_5973 24d ago
Let’s see in a year
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u/denewoman 24d ago
America is a country divided.
Canada is not.
Add the utter chaos and used car salesman leadership in the White House propping up Tesla and Musk - yes let's see in a year. Wall Street isn't happy and right now I am thinking Warren Buffet really has earned his Oracle of Omaha title, but many others in this subgroup are not drinking the same Kool Aid you have.
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u/djfudgebar 24d ago
!remindme 1 year
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u/RemindMeBot 24d ago
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u/djfudgebar 24d ago
Okay, thanks, but I bet he deletes his profile before then.
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u/TandemCombatYogi 24d ago
I just had one of these come up from 3 months ago where the guy swore egg prices would be lower. He did, in fact, delete his profile. 😆
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u/freshcoastghost 24d ago
Well put! They have blind faith in the idiot that bankrupt 6 businesses, one being a casino where people literally give their money to you.
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u/Low-Breath-4433 24d ago
Right, which is why Ford threatened U.S power imports with a 25% surcharge and within 24 hours Trump was on the phone with him conceding to a meeting.
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u/Mundane_Flight_5973 24d ago
Didn’t he back down ?
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u/Low-Breath-4433 24d ago
He "backed down" when he was guaranteed a face-to-face with Trump, which is what he wanted in the first place.
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u/Artistic-Banana734 24d ago
“They will take part of the tariffs”.
No, they won’t. We tried this before. This is not new.
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u/Mundane_Flight_5973 24d ago
When they tried it was a different economy now American economy is way bigger and many countries are dependent on the export to the us
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u/Dangerous_Design6851 24d ago
No, it wasn't. It was the same economy. It was the same economy five years ago. It was the same economy a hundred years ago.
Nobody is willingly taking on the cost of blanket tariffs unless there is actual domestic competition that can compete at lower prices, which there fucking isn't. When everyone has to pay tariffs, there is literally no reason to unnecessarily take on the cost yourself because you aren't competing with other competitors.
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u/Mundane_Flight_5973 24d ago
There are always competitor and anyway this works only for essential goods. For non essential goods a price over the equilibrium will reduce the net profit of the company. Not saying that the company will take all the tariff on itself but what I say is that it is not all passed to the consumer
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u/Brokenandburnt 24d ago
Oh yes it is, and always has been.
If a country tacitly accepts the tariffs they will be crushed. Industries will move, trade dries up.
Noone that has the choice of passing the cost on will. The only one who cannot pass on the cost is the consumer.
Sure, they can refuse to buy it, which is in and of itself a cost because now the consumer don't have the good.
With blanket tariffs sooner or later essential good will increase in price and the consumer will be poorer.
And all the bullshit means a contracting economy which together with the cuts will affect the safety net.
This will be a shitshow.
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u/Mundane_Flight_5973 24d ago
Non essential goods as I said are not essential and replaceable, the cost is passed to the consumer only if you think it will create a greater profit than absorb yourself
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u/NumberSudden9722 24d ago
Maybe in an ideal world, sure.
They will not absorb the tariff. It will get passed on to the end consumer, either through increased pricing at the POS or extra fees during PR and procurement.
In the case of a foreign product versus domestic, the domestic provider will raise their price to just under the tariff price.
In the case of a product you cannot get anywhere else, they will absolutely raise prices to offset the tariff, possibly even higher and then claim it's because of market instability or processing fees.
The only time I would imagine they would take losses, would be to gain market share or market dominance but once that is achieved the prices will skyrocket.
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u/Mundane_Flight_5973 24d ago
In the case of a non essential foreign product with no domestic competition, the company will absorb the tariff to maintain stable the leve of goods sold
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u/NumberSudden9722 24d ago
Why? If you can't get it anywhere else, what thought process would indicate that they would take a loss, for you? (Not you specifically). If anything they would just leave the market and sell somewhere they won't have to take a loss.
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u/Mundane_Flight_5973 24d ago
Because the us is by far the biggest market you can get in, even bigger than china from the occidental point of view. Since over the equilibrium the price is elastic, increasing the price would decrease the revenues so to keep the revenue stable they should decrease the profit margin.
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u/djfudgebar 24d ago
Because the us is by far the biggest market you can get in
Not once Trump makes us all poor! But don't worry, there will be lovely jobs for you to take in the factories and fields, and you'll get to have lots of kids to work in the coal mines. MAGA!
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u/nubtraveler 24d ago
Maybe if they are selling something with very high profit margin, they may lower the price slightly due to the lower demand caused by the tarrifs, but it will not offset the full tarrif, and if the profit margin are razor thin, then they would rather sell less product than sell at a loss.
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u/Mundane_Flight_5973 24d ago
The profit margin is never so thin, it is enough if half the price is absorbed by margin to create a net benefit for the us
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u/kiloSAGE 24d ago
These regards really think we send an invoice to Xi, Carney, and Sheinbaum and they just write a check to the Treasury.
Then these regards think for-profit companies aren't going to pass an extra cost onto the consumer.
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u/astuteobservor 24d ago
Walmart tried to demand a price reduction from Chinese factories. The Chinese govt stepped in and told Walmart it will be a breach of contract that holds heavy penalties.
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u/Mundane_Flight_5973 24d ago
The Chinese government is not one of the country really dependent on the us
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u/mondayaccguy 24d ago
Yes it is. Surprised you don't know that .
Look up who trades with China...
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u/Mundane_Flight_5973 24d ago
Doesn’t matter, everyone wants china’s products Europe will buy them
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u/mondayaccguy 24d ago
Cool story mate, but I am sure you are aware that Europe already buys almost the same as the US...
China is tied to the West, they have no way out
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u/Low-Breath-4433 24d ago
>KKKaroline bursts through the wall
"ACTUALLY, THEY'RE TAX CUTS!"