So it won’t cause retail price increases, and it will actually be a hit to the foreign producers’ pockets and not American consumers. Either that, or they go out of business and American companies have to make our stuff again.
The original comment I had replied to was:
The USA imports approximately $1.6Trillion per year. A 20% across the board import tariff eliminates the deficit tomorrow.
As the value and/or amount of imported goods drops, so does the amount of money you're able to collect in tariffs, and then the math doesn't work any more.
We agree. The revenue is not easy to calculate exactly and it is not the purpose of the tariff.
If retail prices were to remain the same, then the wholesale import price would need to drop to $1.33T and the revenue would only be $267B rather than the $333B ca_Conservative posited. It is still $267B taken from the pockets of the foreign producers and as US tax revenue would replace half the corporate income tax or two thirds of the current deficit.
If foreign producers are not willing to take the full hit, then import prices go up some but so do the tariff revenues and American products are more competitive.
If people can only afford a $35K car, will they still buy a BMW that is now $40K or will they look more closely at the GM or Ford products that are still $35K ? Or will GM & Ford settle for selling fewer cars at $38K ?
How do things change if the German tariff revenue is handed over to Ford & GM for each car they export (which is what Germany did to the BMW that was exported to the US) and their cost per unit for American sales is lowered ?
Or do the US and Germany agree that Germany will credit the VAT on American imports in exchange for no tariffs on German imports and we actually achieve “free trade” ?
This is the political purpose of tariffs and the point Trump has been making about “free trade”. Trump is not a socialist and his trade goal is not tax revenue like the liberals’ tax-so-we-can-fund-more-spending schemes.