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Posted on 12/18/2025 6:44:28 AM PST by dangus
Inflation is only at 2.6% year-over-year. This means that nearly 100% of the cost of tariffs has been eaten by the foreign manufacturers and importers. Which is exactly what I’ve been arguing would happen. Let me explain what is happening:
The notion that tariffs would be passed onto customers has always been laughable on its face, once you understand that manufacturing is only 20% to 40% of the price of an item for sale. The rest includes advertising, warehousing, transportation and sales markup. (Importers have high transportation costs to get the product to America, but that’s all part of replacing the cost of manufacturing with the cost of importing.) So, from the start, tariffs offer $2.50 to $5 of revenue for every $1 incurred by Americans, even if importers and foreign manufacturers pass on every penny of increased cost.
But even that is ignoring the fact that Chinese imports’ prices aren’t being driven by the cost of attaining the product; they are driven by the cost of replacing the product with a domestic product. To put it simply, if an American can provide a product for $100, and it can be imported from China for $60, the Chinese aren’t going to offer at close to $60 to be charitable to U.S. consumers; they’re going to sell it for close to $100 (probably slightly less because there is some perceived less value just because it’s Chinese.) So when their costs rise to $90, they can either eat the rise in cost, and continue selling it for close to $100, or they can decide not to sell it. Either way, they’re not going to sell it for over $100. (There’s an exception, but hold on for one moment.)
We should therefore not be surprised that inflation is far closer to the otherwise expected inflation rate of 2% to 2.5%, than to the inflation rate that one would expect if the one-third of the retail sales market that is represented by imports raised their prices by 20%, which is very roughly the average tariff. (I’m a little non-committal to the actual average tariff rate because the rates have been changing so fast, and import rates have been adapting to them.) If retailers raised their prices proportional to tariffs, we would expect a 9% inflation rate.
We got a 2.6% inflation rate. Depending whether you would have expected a 2% or a 2.5% inflation rate, that 2.6% rate means that corporations (mostly foreign) ate 90% to 99% of the tariff increases.
Now, back to that exception: Remember that imported good that the Chinese had been importing for $60 and supplying for close to $100? Suppose that the American corporation could manufacture it for $100, but can’t ramp up production instantly. Now, consumers will bid up the price, and it shoots to well above $100… temporarily. The Chinese firm is unlikely to do this because the price increase will end up simply funding American capacity expansion, and then they lose the market. But this has probably happened in a limited number of instances.
This suggests that even the tiny increase in prices may be only temporary.
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Dims (politicians as a whole) will never admit they are/were wrong. Just onto the next dinner party and fund raiser.
Tariffs and inflation really weren’t connected anyways . People making the claim weren’t simply mistaken but actually lying since they just hate tariffs and wanted to scare people
I should clarify this:
When I wrote, “so, from the start, tariffs offer $2.50 to $5 of revenue for every $1 incurred by Americans,” I was referring to consumers, based on the expected rise in prices. In case I muddled the context, I was describing the situation if 100% of the cost was passed on by the importers, meaning that a 20% tariff would not mean a 20% price hike, but only an 8% price hike.
I should also note that this is based on averages and would not be evenly distributed. Direct-to-consumer sites like Temu would probably charge nearly the full cost of the tariff. (And if fact, because of loophole closures, they probably would even exceed the 20% increase.) Other retailers might see only a 4% hike.
I love reading common sense
That’s pretty much my entire point.
Trump understands the real world, unlike academic “economists” and their idiot mouthpieces in the media. He understood that tariffs would be partially absorbed at each step of the supply chain, and have minimal effect by the time a product reached the shelves. Meanwhile, using the threat of steep tariffs to drive positive trade concessions and bring capital expenditure to the US was totally missed by the “experts.”
You also miss the incredible irony that the news media and Demonrats suddenly found themselves in pure opposition to a tax that would be nearly entirely paid for by corporations. They love sales taxes, even though 100% of sales taxes get passed on to consumers, except to the degree that the inability to afford basic goods creates some price elasticity. But charge a tax that gets paid for by corporations, mostly foreign? And suddenly taxes become unthinkable?
Monetary inflation is the erosion of purchasing power in the unit of account, in the currency.
This has absolutely nothing to do with supply and demand, or importing slave wage goods from around the globe due to offshoring. Our nickle-fvcker corporations are being rational insofar as they are importing illegal aliens and exporting whole industries, while strangling American businesses under myriad regulations and laws.
Paging Rand Paul and Thomas Massie…
Bingo
They have a full time job keeping all those spinning plates in the air. One of them is preventing the great unwashed to figure out that inflation is a government caused phenomenon. They want people to think it just sort of falls out of the sky, and nobody knows what causes it. They’ll even try to tell you a “little bit” of monetary inflation is a good thing (losing half your savings and investments over 20 years is “good for the economy”!). Such are the experts going back to Keynes, pseudo-intellectual apologists trotted out to explain how everything will be fine while they steal everything.
“Taxing” foreign entities with tariffs does the democrats no good, because it can’t be gamed to give their base any special breaks from it.
The problem with tariffs has never been inflation (an ongoing increase in the general price level over time). The problem is that they raise the prices of the taxed imports and cause retaliation by exporting nations.
If you believe the outright lies out of this administration that inflation has dropped you’re no different than all democratic goofs who believed that Biden had no cognitive mental decline during Barack Obama’s third term.
Trump’s economic policies have been a disaster and if he keeps it up the Democrats will net the largest midterm win since Newt Gingrich of 1994 even flipping Red States.
I had lunch with Scott Pressler a couple weeks ago and even he believes we are heading into certain doom
The federal reserve aims for 2% inflation since zero inflation is some how bad for business
Yes, inflation is ~100% tied to money printing. Nothing to do with fees/tariffs/etc.
But, commie trash will insist it is ‘cause of TDS.
But, a lot of folks look at changing prices and anything else changing and link the two. The ole causation vs correlation bit.
But that doesn't mean that prices are lower than before Biden went into office. It means that prices aren't rising as fast.
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Full disclosure, I have seen lower prices here in Alabama on things that aren't part of the "official" CPI (gas, food, rent). In other words, I see lower prices on the things that matter.
Make sure Hek’em is informed.
Scott’s a great resource.
It is true costs haven’t come down much, save for gas, but I noticed a temporary spike on fresh foods and such that has now more than disappeared. A bag of six avocados at Costco went from $5 to around $9, but is now closer to $4, for instance. Tariff costs and their uncertainty caused that spike.
Illinois increased gas taxes, so their price has stayed or gone higher. Other states increased gas taxes, too.
What do you think the inflation rate really is? What would you suggest be done?
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