As 90% of Americans say grocery prices are a major source of stress, the nation's top grocery chains have said they're passing the cost of Trump's tariffs onto consumers, according to a new report.
Another fun thing about tariffs. Those domestic producers that are being protected by tariffs will increase their prices as high as they can.
For example, let’s say an American company can sell a widget for $5 and a Chinese company can sell it for $4.
You slap a 100% tariff on the Chinese widget, now it costs the consumer $8.
The American company can now sell you the widget for the initial $5 and leave $2.99 on the table, or they can jack their price up to $7.99, be cheaper than the Chinese widget, and increase their profits while gesturing around vaguely at “market conditions”
End result, you pay more for the widget, more than it the foreign producer used to sell it for and more than the domestic producers used to sell it for.
Now imagine you make something that has dozens of inputs and that happens to every input.
It’s not just domestic companies being greedy (though they definitely are) they kinda have to raise prices to avoid shortages. Basic supply and demand pressures.
In the long term they could expand their production and lower the prices, which is theoretically the point of the tariffs. But no one is going to make that long term investment because of the likelihood that the tariffs will be ruled illegal by the courts and general TACO stuff.
Here in Australia, most of the inflation we encountered in 2024 was due to large retailers simply increasing their prices because everyone expected everything to be more expensive.
Yup, and when the tariffs go away, they’ll keep the higher prices and pocket the difference.
Another fun thing about tariffs. Those domestic producers that are being protected by tariffs will increase their prices as high as they can.
For example, let’s say an American company can sell a widget for $5 and a Chinese company can sell it for $4.
You slap a 100% tariff on the Chinese widget, now it costs the consumer $8.
The American company can now sell you the widget for the initial $5 and leave $2.99 on the table, or they can jack their price up to $7.99, be cheaper than the Chinese widget, and increase their profits while gesturing around vaguely at “market conditions”
End result, you pay more for the widget, more than it the foreign producer used to sell it for and more than the domestic producers used to sell it for.
Now imagine you make something that has dozens of inputs and that happens to every input.
Truly a golden age
It’s not just domestic companies being greedy (though they definitely are) they kinda have to raise prices to avoid shortages. Basic supply and demand pressures.
In the long term they could expand their production and lower the prices, which is theoretically the point of the tariffs. But no one is going to make that long term investment because of the likelihood that the tariffs will be ruled illegal by the courts and general TACO stuff.
Here in Australia, most of the inflation we encountered in 2024 was due to large retailers simply increasing their prices because everyone expected everything to be more expensive.
It’s been the same in the US since covid.