And no, that's not a special edition from Swatch to goose sales this November ; )
As the dust settles, and geopolitical uncertainty seems likely to be a "state of being" for the next four years, I thought it might be interesting to consider what the impacts might be if the promise of tariffs is realized and how it will impact things like, I don't know, the cost of watches?
"When the Trump administration imposed tariffs on various imports in 2018, the stated purpose was to boost US industries and punish foreign exporters. But rather than hurting foreign exporters, the economic evidence shows it is American firms and consumers hardest hit by the Trump tariffs. The tariffs resulted in higher prices for a wide variety of goods that US consumers and businesses purchase. The Biden administration has continued and even increased many of the Trump tariffs—drawing some attention as inflation rises. And while tariffs do raise prices for American consumers, their impact on economy-wide inflation is relatively small.
When the US imposes tariffs on imports, US businesses directly pay import taxes to the US government on their purchases from abroad. The economic burden of the tariffs, however, could fall on others besides the US business directly paying the tax, including foreign businesses selling goods to US businesses (if foreigners lower their prices to absorb some of the tariffs), or US consumers ultimately purchasing the goods (if US businesses raise their prices to pass on the tariffs).
Historically, economists have generally found that foreign firms have absorbed some of the burden of tariffs by lowering their prices, meaning domestic firms and consumers haven’t borne the entirety of higher tariffs in the past. In contrast to past studies, however, new studies have found the Trump-Biden tariffs have been passed almost entirely through to US firms or final consumers.
Economists Pablo Fajgelbaum, Pinelopi Goldberg, Patrick Kennedy, and Amit Khandelwal examined the tariffs on washing machines, solar panels, aluminum, steel, and goods from the European Union and China imposed in 2018 and 2019. They found that US firms and final consumers bore the entire burden of tariffs and estimated a net loss to the US economy of $16 billion annually, including more than $114 billion in losses to firms and consumers, offset by small gains to protected producers and revenue gains to the government."
Now, funnily enough, the guys (almost exclusively men) working in Watch Town US are very excited about the new administration coming in.
And, fair enough, it is a free country.
And, fair enough, it is a free country.
And, fair enough, it is a free country.
And, fair enough, it is a free country.
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Now curious to relate, watch town North America is populated by a lot of fans of the returning President-Elect.
And fair enough, it is a free country.
But what is even more curious is that many folks in the lower 48 cited inflation as their motivation for voting as they did, and that it was downright un-American to pay an additional .10 for a dozen eggs.
And, fair enough, it is a free country.
The incoming President-elect has promised 60% tariffs on items coming into the US from China, and 10% from everywhere else. His rationale being that this won't hurt Americans as it is the Chinese (and other governments) who pay the tariffs. Now in fairness, I am not a trained economist, and I did't graduate from Penn's Wharton School. But as I have spent a fair amount of time working in Watch Town and Watch Town adjacent areas, I feel fairly confident in imparting the following reality - tariffs are not paid by the exporting countries. In fact, they are not paid by countries at all. How can I be so sure? Well, I have this odd habit of reading and researching rather than parroting what I hear on social media. Not to mention I have worked for companies that sell (and ship) to US customers from Switzerland, Japan, and Germany, and suffice it to say that those countries are not paying the import duties and taxes. You, Red, White, and Blue customer are. A few companies will lower their prices and eat the expense, but that is not a universal practice.
So, as a public service, I thought I'd share some of my learnings with you. An interesing piece on import tariffs that even I, a graduate from a large land-grant university can understand. You can read it in its entirety here -
Authored by ,
When the US imposes tariffs on imports, US businesses directly pay import taxes to the US government on their purchases from abroad. The economic burden of the tariffs, however, could fall on others besides the US business directly paying the tax, including foreign businesses selling goods to US businesses (if foreigners lower their prices to absorb some of the tariffs), or US consumers ultimately purchasing the goods (if US businesses raise their prices to pass on the tariffs).
Historically, economists have generally found that foreign firms have absorbed some of the burden of tariffs by lowering their prices, meaning domestic firms and consumers haven’t borne the entirety of higher tariffs in the past. In contrast to past studies, however, new studies have found the Trump-Biden tariffs have been passed almost entirely through to US firms or final consumers.
Economists Pablo Fajgelbaum, Pinelopi Goldberg, Patrick Kennedy, and Amit Khandelwal examined the tariffs on washing machines, solar panels, aluminum, steel, and goods from the European Union and China imposed in 2018 and 2019. They found that US firms and final consumers bore the entire burden of tariffs and estimated a net loss to the US economy of $16 billion annually, including more than $114 billion in losses to firms and consumers, offset by small gains to protected producers and revenue gains to the government."
And, fair enough, it is a free country.
But I do have to wonder how enthusiastic they will be when their sales numbers start to stall out. Now it is curious to relate, that several of these guys (again, almost exclusively men) are absolutely convinced that nobody will balk at paying an EXTRA 10% for their watches, pens, and other non-essential luxury goods. I heard many of these fellows crowing post election day as to their certainty of this point.
And, fair enough, it is a free country.
But, and here's the rub - if we had a record number of people cite the economy and the price of eggs, milk, and gas as a reason to vote the way that they did, do you really think that they won't feel it when the extra 10% gets larded into the price of their watches, pens, and other nonessential luxury goods? Moreover, when Swiss brands are noted not for their sudden discounting, but rather, very predictable price increases, do you really think that they are going to adjust things just to suit the the US?
And, fair enough, it is a free country.
And one last thing - if you labor under any illusions as to China's involvement in the Swiss watch industry, I need only direct you to, well, Switzerland. Ultimately, in politics, love, and family? We tend to believe what we want to believe. We tend not to let realities get in the way of our hopes, dreams, and political promises.
And, fair enough, it is a free country.
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