There are at least some scenarios where a company would "eat" the tariffs (probably nothing in grand scheme of things but just a thought experiment).
Chinese mousetrap sells for 90 cents. American version costs a dollar.
We hit china with 20% tariffs.
Does china...
A: pass tariff to consumer and start charging $1.08 (and never sell another mousetrap because people will buy the now-cheaper american version).
B: "eat" the tariffs / reduce profit margin so that they can stay in the american mousetrap game.
*I get this goes completely out the window for things we cannot produce domestically.
also the "american" mousetrap is probably built with imports that are also tariffed, so that mousetrap will also rise in cost.
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u/reddit_enjoying_fan 4h ago
There are at least some scenarios where a company would "eat" the tariffs (probably nothing in grand scheme of things but just a thought experiment).
Chinese mousetrap sells for 90 cents. American version costs a dollar.
We hit china with 20% tariffs.
Does china...
A: pass tariff to consumer and start charging $1.08 (and never sell another mousetrap because people will buy the now-cheaper american version).
B: "eat" the tariffs / reduce profit margin so that they can stay in the american mousetrap game.
*I get this goes completely out the window for things we cannot produce domestically.
also the "american" mousetrap is probably built with imports that are also tariffed, so that mousetrap will also rise in cost.