Wait, am I reading this wrong. The producer and importer try to soften the impact of the tarrifs only for the retailer to massively increase their prices?
Many retailers increase their prices by multiples of the tariff increase rather than a straight passthrough so that they can maintain their margins. It's probably why a lot of the biggest retailers with monopolies aren't complaining much about tariffs. They mostly keep the same margin and actually increase revenue. Meanwhile, it's been incredibly damaging to small businesses and consumers. Functionally, tariffs have been a massive wealth transfer.
Can't repeat this enough and I'd like to make sure to connect the dots. The Big Beautiful Bill that was signed into law cut taxes. To keep the US Federal Government from going (even more) into debt, Trump introduced aggressive tariffs (it doesn't matter that he introduced the tariffs before the BBB became law because he/they knew the BBB would pass and that was baked into the tariff decision).
The BBB tax cuts benefit the wealthy much more than the average person. The tariffs are borne by both the wealthy and by the average person when they buy tariffed goods, but those tariffs are easily absorbed by the wealthy while acting as an additional tax on the average person by increasing prices. This is just about as direct a transfer of wealth from the average person to the wealthy as you could possibly put into place (barring an actual transfer where the average person is taxed and those dollars are literally transferred directly into a wealthy person's bank account).
In a way, it's a genius move. Convince a healthy chunk of the US population that you're on a populist crusade to bring jobs back to America while increasing the wealth of the wealthy and taking even more of the average person's income. Don't forget that the reason the jobs were exported in the first place was to decrease costs so that, you guessed it, wealthy people would get wealthier (but at least in that scenario the cost of a tv went way down, am I right???).
All that said, I don't mean to suggest that bringing jobs back isn't actually a goal. It's just not the primary goal. My take on the priorities of the current admin's tax policy, including the tariffs (which, broken record, are taxes) 1. decrease taxes on the wealthy 2. decrease income taxes on everyone else who pays taxes 3. get "everyone else who pays taxes" to fund the decreased taxes on the wealthy 4. bring jobs back. Somewhere in there is also "create a mechanism for opaque profiteering." I'm not quite sure where that falls on the list. Cynically it's probably number 2.
Based on the graph, the increase in cost to the retailer was $0.49 and they marked up $1.10. I imagine this is pretty standard markup but multiplies the effect of the tariff and passes it to the consumer, not to mention the producer and importer.
Nobody is "trying to soften the impact of tariffs". Everyone was and is trying to maximize profits. Who ends up paying has to do with "elasticity" which roughly is about how much the tax actually impacts you.
In this case, it ended up that the retailer raised prices, probably because the retailer can just sell domestic wine for cheaper (close substitute). Retailer profits still didn't increase because of reductions in sales (~12% iirc) and increase in after-tariff inventory prices. This is textbook econ 101. Substitute, profit maximization of a firm, supply and demand etc.
You're confusing exporter and importer lowering prices with the retailer facing lower after-tariff inventory costs. Inventory costs still went up.
Retailer profits from foreign wine decreased because of reductions in sales (~12% iirc). This is textbook econ 101, profit maximization of a firm, supply and demand etc.
Taxes make after tax prices go up and reduce profits due to reduced quantity.
No reason to go searching for a "plausible excuse" or some greater critique of culture.
so that's not true - I worked for years in the grocery business and prices DO come down and in fact, I've seen evidence all over the NYC market of prices falling recently.
examples include eggs for $2.99 in some places (!), and other competitive categories like unbranded meat and cheese, pasta, and more.
prepared foods seem to be slower, I'm assuming because labor costs continue to rise.
This is a deliberate choice by Congress to give the Fed a mandate to target 2% inflation. In particular Congress hasn't given them any instruction to try to make up for mistakes. If inflation overshoots in one year then they don't try to undershoot in the next year. They just keep trying to hit 2% inflation.
So if retailers tried to lower prices to pre-COVID levels then they would fail. The Fed would see the falling prices and cut rates until 2% inflation was achieved.
One of the funny things the tariff dispute made public was how in Canada buying wine/beer from other provinces from within Canada is treated like a foreign import by the provinces (causing a huge price markup ala tariffs and tons of paperwork for small vendors). We have lots of internal trade barriers like that which were ironically originally intended to help small players compete.
"Help small players compete" isn't really how I'd interpret Ontario's wine industry, which is -- like so much of Canadian capitalism -- dominated by only two companies, Vincor and Andrew Peller. They have effectively achieved regulatory capture having established in the 80s a retailing, tariff, taxation, regulatory (VQA and other things), and even municipal zoning (go look at Niagara and area zoning laws some time about things like minimum acreage etc) that squeezes out small players in favour of their own operations.
This all came out of the signing of the original FTA in the 80s. The established players at the time were basically given a permanent advantage as part of negotiations around that. (For 30 years only those two companies could run their own retail stores for example).
Through acquisition and obfuscation they've built up a whole trading card stack of wine labels, that make it look like there's far more diversity here than ther e is. The story in the Ontario wine industry is a lot like how our tech sector works -- Vincor is Google, and smaller wineries are startups, and the "exit strategy" is to get bought up by them. Otherwise you'll probably perish.
Even the VQA "quality" descriptors are written to favour their own established businesses.
(Some chipping away at this recently at least. I hate Doug Ford but he's the first government to really undermine these monopolies in the last 40 years because by opening up retailing at grocery stores and gas stations etc. And VQA has become a little less restrictive about things like varietal choices etc in the last 5 years.)
Wish I knew less about this subject. I used to fantasize about operating my own small winery. Something that's not possible in Ontario unless you're well connected, extremely rich, or masochistic (or preferably all of the above).
If by "lots" you mean 2: alcohol and licensed labor. There are other things that could be easier, but they're not true barriers. Like differences in building codes.
Tbf they did start to reduce a bunch of provincial trade barriers via Canadian Free Trade Agreement (https://www.cfta-alec.ca/) which was a project started a decade ago. They explicitly excluded alcohol though.
We are pretty lucky in that regard. It is by design. Open trade among the states was a primary point of argument in ratification of the US Constitution. States were concerned with a federal government having any power to restrict the engine of their own success.
As a result the US system was designed to prohibit restricting trade between states and encourage restricting trade at the national border through tariffs. The goal was to encourage internal trade and production that builds national wealth and skills. The government was to make profit off of international trade through tariffs. That structure encouraged government to protect the economic engine domestically to continue profiting from international trade.
The big one in Canada is licensed labor, and the US has the same problem. Hairdressers not being able to work across state lines without getting another license, for instance.
I’ve been reading a presidential bio every year (I’m currently up to Monroe and I hope that I’ll be dead or not reading before I’ll be reading the 44th bio¹) and it’s an interesting way to get focused senses of American history and trade between the former colonies was a big issue before the constitution was instituted.
Note we’re only talking about alcohol here. It’s funny how people read something, skip the specifics, assume it applies to everything and then spread misinformation.
So if you want a comparison in USA it needs to be something that is regulated by the US government, like hydroxacloroquine.
I feel the greatest trick of American politicians is that the term “tariff” tends to be used by most people instead of “import tax”.
I live in South Africa and we have significant import taxes on certain kinds of items, but nobody (aside perhaps from economists/accountants/tax practitioners, etc) calls them tariffs.
It’s not the overseas seller who pays extra for the item to be imported, it’s the importer, paid to the tax man. It’s a tax paid on imports. That cost is ultimately passed on to end buyers, such as myself. Why would I generally refer to it as a tariff except for reasons of pedantry?
If you've seen one tariff study, you've seen one tariff study. There are so many factors that end up influencing the end-state of the system. It literally depends on the particular type of good, the producer, producer's market shares both in the country applying the tariff as well as globally, the number of tiers of distribution, margin structures of everybody involved, etc., etc. So, sometimes we see an increase; other times, we little to none.
> Pass-through at the border is incomplete, yet consumers paid more than the tariff revenue collected.
Wonder how many other industries used tariffs as an excuse to further juice their profits. (Edit - turns out this study is looking at pre-2021 data, so we don't even know what they've done this time!)
This doesn't increase their profits because, consistent with economics, increasing prices reduces quantity. Profit depends on the amount you sell, not just the price.
>The researchers estimate that the increase in the retail price to consumers was about 6.9 percent. This was on the $23 pre-tariff retail price, so it amounts to $1.59, which, in dollar terms, exceeded the tariff revenue collected.
Is seemingly contradicted by goldman sac's report, which claims consumers only paid 55% of the tariff increase.
To what end? It varies a lot. Between 0% and 100%+ of the cost could be passed onto the consumer (100%+ when every distribution tier passes along what came to it and then marked it up). Maybe you can create a statistical distribution with mean/median and standard deviation, but that tells you nothing about what might happen when you next institute another tariff.
I always look at these authors lines and weep a bit. "Aaron B. Flaaen, Ali Hortaçsu, Felix Tintelnot, Nicolás Urdaneta, Daniel Xu" all researchers at American institutions we are in the middle of incinerating.
The original link has nothing to do with any recent tariffs. The study period from 2018 through 2022 and specifically looked tariffs on wine driven by the Airbus/Boeing kerfuffle happening at the time.
It is almost impossible to order decent cognac (e.g. Chateau Montifaud) from small french manufacturers. Fine Drams for example simply refuses to ship to the US and to deal with tariffs and paperwork.
Wine and beer, as well as other alcoholic drinks, consumption is way down in the US. Either they jack up prices, or they go out, like a bunch of California wineries have recently. Tariffs are an excuse, not the reason.
Readit News
The BBB tax cuts benefit the wealthy much more than the average person. The tariffs are borne by both the wealthy and by the average person when they buy tariffed goods, but those tariffs are easily absorbed by the wealthy while acting as an additional tax on the average person by increasing prices. This is just about as direct a transfer of wealth from the average person to the wealthy as you could possibly put into place (barring an actual transfer where the average person is taxed and those dollars are literally transferred directly into a wealthy person's bank account).
In a way, it's a genius move. Convince a healthy chunk of the US population that you're on a populist crusade to bring jobs back to America while increasing the wealth of the wealthy and taking even more of the average person's income. Don't forget that the reason the jobs were exported in the first place was to decrease costs so that, you guessed it, wealthy people would get wealthier (but at least in that scenario the cost of a tv went way down, am I right???).
All that said, I don't mean to suggest that bringing jobs back isn't actually a goal. It's just not the primary goal. My take on the priorities of the current admin's tax policy, including the tariffs (which, broken record, are taxes) 1. decrease taxes on the wealthy 2. decrease income taxes on everyone else who pays taxes 3. get "everyone else who pays taxes" to fund the decreased taxes on the wealthy 4. bring jobs back. Somewhere in there is also "create a mechanism for opaque profiteering." I'm not quite sure where that falls on the list. Cynically it's probably number 2.
In this case, it ended up that the retailer raised prices, probably because the retailer can just sell domestic wine for cheaper (close substitute). Retailer profits still didn't increase because of reductions in sales (~12% iirc) and increase in after-tariff inventory prices. This is textbook econ 101. Substitute, profit maximization of a firm, supply and demand etc.
You're confusing exporter and importer lowering prices with the retailer facing lower after-tariff inventory costs. Inventory costs still went up.
Prices only go up, all that's required is a plausible excuse.
This is what happens when you shape your entire individual and cultural identity around "number go up"
Taxes make after tax prices go up and reduce profits due to reduced quantity.
No reason to go searching for a "plausible excuse" or some greater critique of culture.
(I've no doubt the supply chain was a mess for a hot minute, but years later?)
examples include eggs for $2.99 in some places (!), and other competitive categories like unbranded meat and cheese, pasta, and more.
prepared foods seem to be slower, I'm assuming because labor costs continue to rise.
Just like food prices didn't just jump one day, they won't just drop one day. We target 2% inflation, so they'll still go up, but slower.
Going up slower than wages means better affordability.
https://fred.stlouisfed.org/series/M1SL
So if retailers tried to lower prices to pre-COVID levels then they would fail. The Fed would see the falling prices and cut rates until 2% inflation was achieved.
https://www.cbc.ca/news/canada/nova-scotia/ontario-nova-scot...
This all came out of the signing of the original FTA in the 80s. The established players at the time were basically given a permanent advantage as part of negotiations around that. (For 30 years only those two companies could run their own retail stores for example).
Through acquisition and obfuscation they've built up a whole trading card stack of wine labels, that make it look like there's far more diversity here than ther e is. The story in the Ontario wine industry is a lot like how our tech sector works -- Vincor is Google, and smaller wineries are startups, and the "exit strategy" is to get bought up by them. Otherwise you'll probably perish.
Even the VQA "quality" descriptors are written to favour their own established businesses.
(Some chipping away at this recently at least. I hate Doug Ford but he's the first government to really undermine these monopolies in the last 40 years because by opening up retailing at grocery stores and gas stations etc. And VQA has become a little less restrictive about things like varietal choices etc in the last 5 years.)
Wish I knew less about this subject. I used to fantasize about operating my own small winery. Something that's not possible in Ontario unless you're well connected, extremely rich, or masochistic (or preferably all of the above).
If by "lots" you mean 2: alcohol and licensed labor. There are other things that could be easier, but they're not true barriers. Like differences in building codes.
As a result the US system was designed to prohibit restricting trade between states and encourage restricting trade at the national border through tariffs. The goal was to encourage internal trade and production that builds national wealth and skills. The government was to make profit off of international trade through tariffs. That structure encouraged government to protect the economic engine domestically to continue profiting from international trade.
⸻
1. Cleveland doesn’t get two bios.
So if you want a comparison in USA it needs to be something that is regulated by the US government, like hydroxacloroquine.
I live in South Africa and we have significant import taxes on certain kinds of items, but nobody (aside perhaps from economists/accountants/tax practitioners, etc) calls them tariffs.
It’s not the overseas seller who pays extra for the item to be imported, it’s the importer, paid to the tax man. It’s a tax paid on imports. That cost is ultimately passed on to end buyers, such as myself. Why would I generally refer to it as a tariff except for reasons of pedantry?
https://libertystreeteconomics.newyorkfed.org/2026/02/who-is...
https://www.nber.org/papers/w34620
https://www.kielinstitut.de/publications/americas-own-goal-w...
This one has even more egregious findings:
> Pass-through at the border is incomplete, yet consumers paid more than the tariff revenue collected.
Wonder how many other industries used tariffs as an excuse to further juice their profits. (Edit - turns out this study is looking at pre-2021 data, so we don't even know what they've done this time!)
>The researchers estimate that the increase in the retail price to consumers was about 6.9 percent. This was on the $23 pre-tariff retail price, so it amounts to $1.59, which, in dollar terms, exceeded the tariff revenue collected.
Is seemingly contradicted by goldman sac's report, which claims consumers only paid 55% of the tariff increase.
https://www.idnfinancials.com/news/57938/goldman-sachs-us-co...
Also the tax burden will fall on different places depending on the markets and the good in question.
Does anyone collect them?