Ludwig Von Mises could not have seen the treasonous sell out of American politicians transferring our in-country manufacturing to China, Mexico, and other low cost (slave?) labor nations this gutting our middle class. We need to rebuild that manufacturing infrastructure and tariffs, which is us buying our capabilities back into the US, is thoroughly justified and necessary. The example of precious metals, and I know this is the Silver perspective newsletter, is nonetheless tunnel visioned. The overall health of our manufacturing base and rebuilding our middle class is the bigger picture.
Tariffs are badly misunderstood by 99% of the people who comment on them.
In practice, a tariff is NOT applied to the retail price of the product.
A tariff is applied to the good or product based on the ‘first sale price’. In other words, at whatever price the manufacturer sells the product to the first level of distribution, that is where the tariff is calculated. It cannot be any other way. Not logically, or logistically.
It would take 1000s of words to adequately explain how this works in practice and why this is the only way tariffs can be applied. So I won’t bore anyone with all of that. But, let’s use an example.
In 2024 Black and Decker builds a toaster in China. They sell it to a Distributor in Hong Kong for 14 dollars. After 2-3 more distribution steps the toaster ends up on the shelf at Walmart for $60.
In 2025 there is a 25% tariff on products made in China. Apply the tariff to the ‘first sale price’ and the amount of the tariff is 3.50. If Walmart passes along the entire cost of the tariff the toaster now costs 63.50. A 5.8% increase. Not insubstantial, but not 25%.
In practice, completion will likely result in some, but not all of the tariff being passed along to the consumer. I’m not arguing for tariffs one way or the other.
But the amount of misunderstanding of how they work is, like I said, around 99%.
Ludwig Von Mises could not have seen the treasonous sell out of American politicians transferring our in-country manufacturing to China, Mexico, and other low cost (slave?) labor nations this gutting our middle class. We need to rebuild that manufacturing infrastructure and tariffs, which is us buying our capabilities back into the US, is thoroughly justified and necessary. The example of precious metals, and I know this is the Silver perspective newsletter, is nonetheless tunnel visioned. The overall health of our manufacturing base and rebuilding our middle class is the bigger picture.
Tariffs are badly misunderstood by 99% of the people who comment on them.
In practice, a tariff is NOT applied to the retail price of the product.
A tariff is applied to the good or product based on the ‘first sale price’. In other words, at whatever price the manufacturer sells the product to the first level of distribution, that is where the tariff is calculated. It cannot be any other way. Not logically, or logistically.
It would take 1000s of words to adequately explain how this works in practice and why this is the only way tariffs can be applied. So I won’t bore anyone with all of that. But, let’s use an example.
In 2024 Black and Decker builds a toaster in China. They sell it to a Distributor in Hong Kong for 14 dollars. After 2-3 more distribution steps the toaster ends up on the shelf at Walmart for $60.
In 2025 there is a 25% tariff on products made in China. Apply the tariff to the ‘first sale price’ and the amount of the tariff is 3.50. If Walmart passes along the entire cost of the tariff the toaster now costs 63.50. A 5.8% increase. Not insubstantial, but not 25%.
In practice, completion will likely result in some, but not all of the tariff being passed along to the consumer. I’m not arguing for tariffs one way or the other.
But the amount of misunderstanding of how they work is, like I said, around 99%.