This little snippet appeared in today’s print edition of the Milwaukee Journal Sentinel but was originally published in the Green Bay Press Gazette: Tariff trouble: Brown County businesses face challenges as more tariffs loom.
[side not to MJS: if you are going to print it you should share it on your website too…it’s not friendly to make me search all over hither and yon for the original…and not when I have my subscription renewal sitting here next to my computer…snark]
but here’s something to think about and after this quote I will explain what I am thinking about it…got it?
The first wave of tariffs stung Wisconsin farmers and manufacturers, but Tony Ehrbar said the next wave will force him to change the way he does business.
Ehrbar owns American Tent & Sidewall, a small Green Bay manufacturer that turns Canadian aluminum and Chinese polyvinyl chloride, or PVC, into large party tents for weddings and commercial events. The Trump administration has targeted both raw materials for tariffs — 10 percent on aluminum and 25 percent on PVC.
“There’s an American-made vinyl, but it would not allow me to compete on price. I can raise my prices 25 percent (and pass along the cost to consumers). I can absorb the tariff and take a huge hit to my bottom line. Or I can raise prices a small amount and absorb the rest of the tariff,” Ehrbar said. “I may have to pull back on hiring staff or not grow as fast. The money’s just up in smoke.”
So what am I reading into this? Well the obvious that most of us have been aware of is tariffs are essentially taxes and the cost of tariffs in most cases will be passed through to the consumer…or at least where it can be passed through.
But for firms like American Tent & Sidewall…the two choices seem to be absorb the cost of the tariff or at least a portion of it…after determining how much of a price increase the market will bear. So essentially the company will reduce their net income by the amount of the tariff it can absorb. And what happens when they reduce net income? Well federal and state income taxes take a hit. Does the Trump regime even know that his is going to happen? Rather unlikely because they really really don’t seem to understand how business works.
Can we really bear continued declines in income tax revenue at any governmental level? In a year when we are going ot set a record federal deficit?
American Tent will bear the entire burden of the tariff, because their competition who makes their tents in China aren’t getting a tariff (since they import tents not vinyl) – so raising prices is not an option.
Example of a tariff helping an importer and hurting an American Manufacturer.