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| Once the tariff is placed on the Chinese wrench, the importer pays the $4 tax and passes it on to consumer. Since the USA made wrench is marketed at a premium product worth up to 3x the China wrench, the USA manufacturer will raise the price anywhere from $4-12 higher because it still wants to be considered a premium product. This price increase is also paid by the consumer of the wrench.
Also since China wants to save face in global trade, they will place a retaliatory tariff on product they import from USA. The last time they placed a tariff on soybeans they imported from USA. This caused the soybeans purchased in China from other countries to be cheaper than our soybeans. This effectively lowered the price we as farmers received for our crop since we lost a large export market.
Tariffs are an inflationary tax placed upon consumers, and can have a crippling effect on exporters if the other country retaliates. | |
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Tariffs from below
