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Walmart and Other Retailers Have Eaten the Cost of Tariffs. Now It Is the Consumer’s Turn.
As I reported earlier,,,, our favorite taco place raised the price by 17% since our last visit in July. I am sure they waited as long as they could. It always sucks to be poor but it must be brutal nowadays.
Pretty soon we will be eating saw dust to add bulk to ground meat. I observe these days people are overwhelming buying food rather than big screen TVs at Costco. And that is a bad sign of financial stress.
Cannot imagine the low income families survive under these circumstances.
What did Amazon pay (plus the tariff) for the stool landed?
Many products are marked up 25%-100% to the wholesaler and then the wholesaler marks the item up another 100% or more to determine the retail price (what we pay).
My point is that a 30% tariff (Chinese tariff) on a landed $1 product would equate to $1.30 landed (w/tariff). This would mean the wholesale price would be $2.30 (tariff passed through at a 100% markup to the wholesaler. Finally the wholesaler passes the tariff on to the retail price which doubled again (100% mark up) making the consumer price $4.30.
So, what you paid yesterday without the tariff at $4, is $4.30 today with the tariff. This would be about a 7% increase from yesterday's retail price based on a 30% tariff on the landed price (please check my math). So @Old_Joe 's 8% is pretty close.
I just wanted to point out the math regarding tariff on landed price verses what increase the consumer pays retail.
Q: Where does tariff money go when collected and where does it go?
A persistent misconception about tariffs is that they’re paid by the foreign countries whose goods are being taxed. In fact, the financial responsibility for paying a U.S. tariff falls squarely on the U.S. importer of record. This is the American company, business, or individual that is legally bringing the goods into the country. The money is paid directly to the U.S. government.
While the U.S. government collects the tax from the American importer, the private contract between the foreign seller and the U.S. buyer can specify who ultimately bears the cost. These arrangements are governed by international commercial terms, or Incoterms.
For example, under terms known as Delivered Duty Paid (DDP), the foreign seller agrees to cover all costs, including the tariff, to get the goods to the buyer’s destination. Conversely, under terms like Delivered at Place (DAP), the U.S. buyer is responsible for paying the import duties upon arrival.
Regardless of this private agreement, the check is written to the U.S. government by the registered U.S. importer.
These importers then face a choice: absorb the extra cost, which reduces their profit margins, or pass the cost along to their customers—wholesalers, retailers, and ultimately, American consumers—in the form of higher prices. Economic analyses consistently show that the vast majority of tariff costs are passed on to domestic consumers.
Where does it go?
Once CBP deposits the tariff money, its journey as a distinct “tariff dollar” ends. It flows into a vast financial reservoir from which nearly all federal government spending is paid.
Food produced domestically also went up even though the main ingredients are produced domestically, i.e. pasta. What other factors could contribute to that?
Produces also went out considerably. In many cases, the price almost double! Iceberg lettuce, the cheapest lettuce green, costs $2/lb, whereas it costs less than $1 prior to COVID time. I suspect labor shortage is a major contributor.
As Sven notes, labor shortages are very much a factor. A couple of day ago I read a report on Florida agriculture's problems due to labor shortages. One long-time strawberry farmer, (who had voted for Trump but was now afraid to have his name used because of his fear of retaliation from the MAGA regime), related that he had reduced his planting to 35% of normal because many of his laborers were afraid to show up for work. He said that even though he paid well above the minimum wage he still could not obtain the labor that had been available previously.
OK, that's 65% of strawberries from one Florida supplier that are no longer available for the the market. Anyone think that that might cause prices to rise?
All the discussion about robotic and AI will solve the labor shortage. Going to U-Pick farms such as strawberry would help one to appreciate the back-breaking labor and skills required.
Just look at it took several decades to transform car manufacturing in US, Same goes to assembling complex and small devices such as smartphones.
While the US has a supply of the hard wheat used in pasta production quite a bit of the current pasta supply is imported. If Italy, Canada, South Korea, China, Thailand choose to not deal with silly tariffs well then..... I'm not sure how quickly US production could ramp if in fact they even have the capacity. I also understand the most of the machinery for making specialty pasta is nearly all imported. again mostly from Italy.
Read earlier that some soybean farmers are having difficulty exporting their soybean. China was their main customers, but no more. China is buying soybean from Brazil as they are funding Brazil’s agriculture development through the massive Belts and Roads Initiative.
@JD_co observed that ground beef prices are shooting up (our "high end" store just raised its price 10%) and suggested we might have to resort to tofu on the barbie. That would certainly help out the soybean farmers.
[Our dinner plan for tonight is mapo tofu. Simple seasonings, truly a comfort food.]
@Sven suggested that we might have to resort to sawdust filler. My thoughts turned to Hamburger Helper, which was created during a period of rising inflation that started with LBJ's guns and butter budgets. (Inflation subsequently accelerated under Nixon, Ford, and Carter).
It turns out that HH uses wheat, not soy, as its main ingredient. Since the US is a net exporter of wheat ($5.97B out, $0.77B in), at first glance this would help avoid tariffs. However, as @Mark points out, much pasta is imported. Likewise the US is a net importer of wheat flour ($151M out, $309M in).
From a number of sources I've read that the beef imported from Brazil is mostly "front end" cuts primarily used for ground meat here in the U.S. So this gets a little complicated... Bolsonaro is in trouble because he tried to imitate Trump, so Trump is charging the U.S. citizens 50% more for their hamburger meat.
Now you folks know that I didn't do college or university, so I don't have the financial education necessary to work through that. Can any of you better-educated folks help on this one?
Stopped and got a hamburger yesterday. Was it my last?
Who do I blame Trump or Brazil for losing my burger take out? Trump because he hates the American workers to be defied or Brazil because it won't do whatever Trump wants?
Comments
Cost: $21.18.
I ordered another of the same item today.
Cost: $22.98.
Increase: $1.80 / 8.5%
Good luck, Mr. Powell.
Maybe folks will have to throw some tofu on the BBQ instead of beef.
Thanks, Donnie! You're the greatest.
Cannot imagine the low income families survive under these circumstances.
In @Old_Joe 's stool example:
What did Amazon pay (plus the tariff) for the stool landed?
Many products are marked up 25%-100% to the wholesaler and then the wholesaler marks the item up another 100% or more to determine the retail price (what we pay).
My point is that a 30% tariff (Chinese tariff) on a landed $1 product would equate to $1.30 landed (w/tariff). This would mean the wholesale price would be $2.30 (tariff passed through at a 100% markup to the wholesaler. Finally the wholesaler passes the tariff on to the retail price which doubled again (100% mark up) making the consumer price $4.30.
So, what you paid yesterday without the tariff at $4, is $4.30 today with the tariff. This would be about a 7% increase from yesterday's retail price based on a 30% tariff on the landed price (please check my math). So @Old_Joe 's 8% is pretty close.
I just wanted to point out the math regarding tariff on landed price verses what increase the consumer pays retail.
Q: Where does tariff money go when collected and where does it go?
https://govfacts.org/federal/commerce/so-where-does-tariff-money-go/ Q: Does this resemble a VAT (Value Added Tax)?
Food produced domestically also went up even though the main ingredients are produced domestically, i.e. pasta. What other factors could contribute to that?
Produces also went out considerably. In many cases, the price almost double! Iceberg lettuce, the cheapest lettuce green, costs $2/lb, whereas it costs less than $1 prior to COVID time. I suspect labor shortage is a major contributor.
OK, that's 65% of strawberries from one Florida supplier that are no longer available for the the market. Anyone think that that might cause prices to rise?
Just look at it took several decades to transform car manufacturing in US, Same goes to assembling complex and small devices such as smartphones.
https://ers.usda.gov/sites/default/files/_laserfiche/DataFiles/53736/FoodImports.xlsx?v=66673
Read earlier that some soybean farmers are having difficulty exporting their soybean. China was their main customers, but no more. China is buying soybean from Brazil as they are funding Brazil’s agriculture development through the massive Belts and Roads Initiative.
[Our dinner plan for tonight is mapo tofu. Simple seasonings, truly a comfort food.]
@Sven suggested that we might have to resort to sawdust filler. My thoughts turned to Hamburger Helper, which was created during a period of rising inflation that started with LBJ's guns and butter budgets. (Inflation subsequently accelerated under Nixon, Ford, and Carter).
https://www.blackrock.com/us/individual/insights/guns-and-butter
It turns out that HH uses wheat, not soy, as its main ingredient. Since the US is a net exporter of wheat ($5.97B out, $0.77B in), at first glance this would help avoid tariffs. However, as @Mark points out, much pasta is imported. Likewise the US is a net importer of wheat flour ($151M out, $309M in).
https://oec.world/en/profile/bilateral-product/wheat/reporter/usa (OEC, wheat trade)
https://oec.world/en/profile/bilateral-product/wheat-flours/reporter/usa (OEC, wheat flour trade)
Talk about eating the tariffs!
Now you folks know that I didn't do college or university, so I don't have the financial education necessary to work through that. Can any of you better-educated folks help on this one?
Who do I blame Trump or Brazil for losing my burger take out? Trump because he hates
the American workersto be defied or Brazil because it won't do whatever Trump wants?