Yeah alright so first one kinda makes sense, I just don't know if they pay the tax to the port that then pays the tax to the government or if importers pay directly. Diagram #2 is my idea of what MAGA people think tariffs are, they somehow take them from Chinese ships that come to our ports. Honestly I don't even know if the Chinese actually deliver stuff to us or if we go and pick it up from them
TLDR: we're forgeted lol, but for more specifics, I have broken up this post into sections for readability
Edit:
** I will further divide it up, so this first part will more specifically answer your question: **
What is a tariff and who pays it?So essentially, let's say you are a company making board games and you need a bunch of plastic baubles for game pieces, and the easiest way to get them is ordering from China.
When you place the order with the company from china, you are paying for both the baubles and the shipping cost. This shipping cost is calculated by the price to actually lug the thing in a boat across the ocean (or by plane) and any fees associated with processing and entry into the united states, and the fee for the local distributer to deliver the item. The manufacturer then gives the baubles to the importer, along with the money the collected for the shipping cost to reimburse the importer.
At the ports of call, Customs officers inspect the shipment of baubles and the bill of sale attached showing how much you paid for them to asses the tariff associated. They then collect that fee from the company handling the importing of the baubles, which already has the money because the manufacturer gave it to them as part of the shipping cost.
The importer then is allowed to release the baubles and the portion of the shipping fee for the local distributor to the local distributor which delivers the items to you.
** That is the basic answer, it can be a bit abstract so next is a more specific example: **
How does this look with actual numbers?Currently with the 25% tariff that Annoying Orange imposed on his first term, if you order $4000 of baubles from China, and we say that the shipping company needs $350 to find a place on their ship for you and $150 to give to the local distributor, you will have to pay $1000 on top of that for tariffs bringing the total cost of the baubles to $5500.
Under Annoying Orange's planned expansion on tariffs to 100% from China, that means you now have to pay the $4000 for the shipping company to give to Customs as the tariff fee, and the $500 total shipping fee, bringing the amount you pay to $8500.
For some reason, Annoying Orange fans seem to believe that the manufacturer, instead of asking for that extra $4000 to ship the item you ordered to you, will instead pay that $4000 out of their own pocket, meaning they wont actually get any money from making and shipping the item, which is not how any company ever has ever functioned. They assumed that this would mean the manufacturer would then refuse to sell us the product since it would be at a loss.
** That should be enough to answer your question but if you want an idea of why this specifically is a bad thing, read on: **
So how much more will companies have to pay under the tariff plan?Which actually still brings us to the problem of either the Chinese will no longer sell you the baubles or you cannot afford the baubles at nearly double the price they were before.
That's ok we can just use American manufacturing, which on average costs companies 50% more. That would mean you would only need to pay $2000 more for the same baubles to avoid the fees associated with passing through customs. Heck, you no longer even have to pay the international transporter, and just the local one. This would bring the total cost to $6150 ($6000 in manufacturing, and $150 in local distribution).
Not quite $8500, but still $650 more than the company is currently paying for those same baubles.
However, now every other company in the US wants to avoid paying that extra $2350 to get their baubles from China and decides they want to order their products from America. Well, unfortunately, there are significantly less manufacturing resources available in America (partly why its more expensive to make things here) and imposing a tariff doesn't magically create new factories. Everyone who for some reason right now is an economics major will be quick to quote the rule of Supply and Demand.
Well the supply of American-Made Baubles will not increase, but the demand sure will. Suddenly you have every other board game company demanding baubles for their own games and now you are trying to out bid the ability to purchase baubles which I can guarantee will not stay at $6000.
The thing is, though, the amount they can raise their prices isn't indefinite, because they do have a competitor still (assuming we actually respect reality and China isn't just going to not sell their products because tariffs exist), and so we can assume there to be a cap in American Made products cost which would eventually top out near the $8500 that it costs to get the item from China, or else we would just continue to buy those baubles from China. Lets set an arbitrary upper bound of $8250, that way, with the distribution cost of $150, we end up at $8400 and yay the manufacturer saved $100.
** And that's the gist of it. What people seemed to not understand is how this affects your regular person, so I provided more context below: **
Then, how much more will the consumer have to pay?Now lets bring this home to where it affects Momentum (our arbitrarily selected maga), the consumer.
With the price of baubles is increasing, somehow your company needs to make up that difference.
It once cost you $40 to make a single board game. Lets say that $10 of that cost was the baubles.
Well to make a 50% profit you would mark up the price of the boardgame to $60, and the store would add their own price increase to, lets say $65, which is a pretty decent price for a boardgame these days.
Those $10 in baubles where when the price was $5500 for a batch. Now, however, it costs $8400, a 65% increase. We can round that price up to $17.
The boardgame now costs, $47 to manufacture, which raises the price sold to the store to $71, and the retail price that Momentum pays for his boardgame is now $77.
Which isn't so bad... except.
Remember how all the American manufactories are now overloaded with all the people demanding for baubles? Yeah, that means that they can't be spending as much time making doodads or thingies, which your boardgame also needed but you had previously been sourcing locally or similarly purchasing from overseas. That remaining $30 will also increase in price, which at the same 65% margin, brings it up $19.
That is an increase of $36 in manufacturing fees for this single boardgame, bringing the total cost of assembly to $76.
To make your 50% profit, that is $114 sold to the retailer who then marks it up to $123 which Momentum now has to pay for a boardgame that had once cost $65.
And this isn't just for silly things like boardgames.
This is for food, electronics, construction supplies, automotive parts, practically everything that needs to be made or purchased overseas.
** And if that example on one particular product wasn't specific enough, here is some math. You can skip it if math scares you **
So then, about Momentum's day-to-day expenses?Well everything will be ok because no tax on tips or overtime, right?
Heck, who knows, lets say that suddenly Annoying Orange decides he will not do his stated goal of tax cuts for the wealthy, and instead says tax cuts for everyone, hoorah! No more income tax!
If Momentum was somehow making $65,000, (which is nearly twice the median income in america) he would be taking home $55,250 a year after the 15% tax.
Well now that the income tax rate is 0%, Momentum is taking home more money than ever before, taking home that whole $65,000.
The average expenses per household is around $77,000, but with two working adults, that's more than enough!
But now everything is now more expensive
That $50,000 new car that Momentum had been saving his money for? It now costs $82,500.
That $900 desktop computer Momentum had his eye on? $1485 now.
The $400 a week in groceries that Momentum buys? $660.
If, miraculously, Momentum's rent, utilities, and phone bill doesn't go up in this time, his $6400 in monthly expenses still increases to $8040, costing $96,480 per year, up from $77,280, a difference of $19,000.
Which, if we remember, Momentum previously was paying $10,000 in all his taxes.
That is nearly twice as much as Momentum was paying before.
** more math, feel free to skip if you don't care **
Ok well that isn't that bad, surely Momentum can afford $9000 more a year.That is assuming all income tax is done away with, which wasn't the stated plan.
Annoying Orange only ran on the promise of no tax for overtime.
According to the Bureau of Labor and Statistics, the average American works 35 hours of overtime per year, which equates to about one week's worth of work valued at 1.5x regular labor rates.
If income taxes are remaining the same, and only overtime is not being taxed that means
65,000 / (52 + 1.5 week of overtime) = 52 weeks of $1215 per week at 15% income tax + 1.5 week of $1215 with no tax = $53,703 + 1,823 = $55,525
...
I actually had to go back and check my math on that because holy stuff.
$55,250 with full taxes on overtime compared to $55,525 with no taxes on overtime...
That is a difference of $275. You will be taking home $275 more PER YEAR with Annoying Oranges proposed changes.
Ya'll magas really willing to throw your fellow Americans in internment camps for $275 more per year??
Meanwhile your monthly expenses will increase by $1580 each month.
You realize that the best possible outcome is that this election will cost you $9,000 each year and will more likely cost you $18,000?
But thats ok because we owned the libs.
'MURICA** so yeah, just read the first section if you want, or the second section if you would like more examples. I guess the rest is superfluous to your question but it is still relevant to understand what this all means **
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