Skip to comments.How Trumpís Tariffs Will Make Goods Cheaper
Posted on 10/04/2018 6:41:34 AM PDT by Thalean
Unlike sales taxes, American tariffs are not applied to a products retail price, nor are they applied to the wholesale price. In fact, theyre often not even levied on the entire import price. Instead, tariffs are levied on the first sale pricethe price paid to foreign vendors by American companies or their middlemen.
This method of calculation reduces the tax burden on American consumers, but preserves the tariffs punitive effect on foreign producers.
For example, suppose President Trump were to impose a 10 percent tariff on all Chinese toasters.
Black & Decker makes toasters in China. These toasters sell for $60 in American stores. Thats the retail price. Are tariffs imposed on retail prices? No. This means that the price of toasters will not rise by 10 percent$66 toasters are a media-concocted boogeyman.
So just how much would this hypothetical tariff increase the price of toasters?
American stores buy their toasters from Chinese manufacturers. But because of Chinas (intentionally) convoluted regulatory framework, they often buy them via middlemen located in Hong Kong, Singapore, or Taiwan. These middlemen charge somewhere in the neighborhood of $14 per toaster.
And of course these middlemen dont work for free: they buy the toasters directly from Chinese factories for $7 per toaster. This is the first sale price, and tariffs are calculated on this figure. Thus the tariff charged on a Black & Decker toaster that retails for $60 works out to just 70 cents.
American consumers dont pay 10 percent more for toastersthey pay just 1.15 percent more. And thats assuming Black & Decker doesnt simply source its toasters from one of Chinas competitors, in which case consumers may not see any prices increase whatsoever.
(Excerpt) Read more at amgreatness.com ...
1.15% more isn’t cheaper.
>> 1.15% more isnt cheaper. <<
Keep reading the article.
As a programmer I met many natives of India.
In a moment of idle talk I told an Indian co-worker of a recent chainsaw purchase as I needed to remove some trees.
His response floored me. "Why would you pay for a chainsaw when it was so cheap to have men cut them down for you?"
He didn't yet understand the cost of labor in America.
In India, chainsaws, lawn mowers, etc. are neither bought or sold because labor is so cheap - that means poverty.
Which country has better maintained wood lots and lawns?
Tariffs are needed when a nations regulations and taxes make their own products appear more expensive than products made in countries with less regulations and taxes.
the end of the article states the most important thing. america’s bread and butter is invention. that industry is slipping away.
I agree that innnovation is important and should be protected vigorously, but not that it’s slipping away. My experience in a Fortune 50 company was the opposite - engineers in China and India are competent when it comes to doing the day to day work of developing a product, but have no clue WHICH product to develop. In other words, it has been American innovation that defines what must be done and offshore engineers who implement it, as well as offshore factories that make it. There’s an inverted pyramid effect here - lots of cheap labor workers at the top who have limited skills, a smaller number of more skilled engineers and technicians lower down who perform defined tasks, but at the bottom the entire product or enterprise rests on the creativity and vision of a few. Numbers don’t tell the whole story.
The Trump Administration needs to investigate the questionable “generic medications” coming from China, India, Costa Rica, etc. and bring the generics back into the USA for manufacture and FDA inspection. Only God knows what’s in the medications we’re taking. I read that India has 5,000 labs and 27 FDA inspectors. What are the chances that the medications you’re swallowing were ever checked. All you know about are side effects from the fillers.
Example, Valsartan was just pulled off the market because of cancer-causing ingredients manufactured in China! Buyer beware. I told my pharmacy to indicate on my file, “NO” prescriptions that come from China for me.
I just want one thing, American made nails,screws and bolts again. When I put a philips head screw into a piece of wood, I don’t want to strip the head. When I drive a nail into a piece of wood, I don’t want to bend it with the first blow. The same applies to the nuts and bolts I buy. “Make America make great stuff again.” (Ooooh? a bumper sticker?)
It’s not just generic medications coming from India. I have read even big pharma have at least part of their manufacturing outsourced to India and other places.
Below are comments from the link above!! I know this is a long article, but I do believe it’s a worthwhile read for anyone taking generic and OTC medications.
Terri, NC, August 31, 2017 at 3:45 pm
“...As a former manufacturer of generic OTC drugs, and pioneer in the generic industry, I feel I am qualified to comment on the problems now created by the off shore manufacturing of these drugs, which have little (if any) FDA oversight, no knowledge of the inert ingredients which are being used nor proper oversight to insure that Good Manufacturing Procedures are being followed. Shocking reports of unacceptable ingredients and manufacturing practices being used in some formulations are escaping the once watchful eye of the FDA regularly.
When I, and my colleagues, first began manufacturing generic drugs to provide alternative low cost pharmaceuticals to public, the FDA guidelines were clear, and the main ingredient of the compound was strictly overseen and variances in effectiveness or compound contamination was almost non existent. The drugs mimicked the branded (patented) compound, and the only difference allowed was a small variance in the effectiveness of generic drugs compared to branded products. This was measured by the rate of dissolution of the main drug compound upon ingestion. Generics were highly effective with few problems, and a blessing for consumers who could not afford the high cost of many medications.
As manufacturers moved offshore in search of greater profits (and no doubt, lack of oversight by the FDA) and more and more start up companies entered the market to grab a share of the huge profits being generated by generic manufacturing. The quality of the main compounds began to falter, and the inert ingredients began to include questionable content, which was overlooked or unknown by the governing agencies.
Todays imported generic pharmaceuticals studies have shown that the difference in bioavailability (effectiveness) can be as much as 40% in imported generic medications, and the inert ingredients unknown and often dangerous. Today with the number of manufacturing facilities in India alone totally between 5,000 and 11,000, it is impossible for a handful of FDA regulators to properly oversee such a large number of manufacturing facilities.
Some reports say as few as 19 FDA inspectors oversee these 5,000 FDA facilities in India. Like many other government agencies, the FDA seems to be employing greater numbers of personnel who are either inept, or indifferent, but even if 100% of the personnel were top notch qualified, it simply boils down to not enough inspectors to properly oversee the number of manufacturing facilities. Side effects from either the inert ingredients, or the huge variance in effectiveness of the compound means continued illness, or side effects, which often mean hospitalizations or visits to ERs or physicians and a battery of tests to determine the cause of complaint.
As a huge proponent of generics and a pioneer in the industry, I am concerned about the quality and safety of generics. As more and more companies began manufacturing off shore, and more start up companies are created to grab lucrative profits, problems continue to arise. Where once any drugs coming into the US had to meet strict guidelines and testing, including unannounced FDA inspections of manufacturing facilities and the finished product, problems such as these were almost nonexistant. As generic pharmaceuticals began to be more desired by consumers, the number of offshore manufacturing facilities rapidly increased.
In an attempt to make a statement and encourage companies to have GMP (Good Manufacturing Practices) the Justice Department, a few years ago, fined a dozen or so pharmaceutical giants who were manufacturing in India and China under less than desirable conditions, causing them to pay hundreds of millions of dollars in fines for their misdeeds. The companies gladly paid the fine, but continued to manufacture with few, if any, changes, based upon the huge profits available in the generic industry.
Chain pharmacies and distribution companies have enjoyed huge profits by encouraging consumers to buy generics, to use mail order prescription services and via other programs initiated for profit. Recently pharmaceutical giants like CVS have decided to enter into the manufacturing arena, grabbing more of the profits, and will eventually put them into a monopoly situation in an industry which is already enjoying huge profits with less and less benefit to consumers. Several top pharmacy chains were recently hit by a lawsuit for overcharging consumers who bought certain generic drugs with their insurance coverage, while the proceeds (co-pays) were kicked back to third party pharmacy benefits managers!
Consumers would have been better off paying cash, which often resulted in less out of pocket costs to them than the co-pay on purchases through their insurance. In addition to these kinds of tactics, we have no idea of the effectiveness of the main compound, nor do we know what additional ingredients are being used in generic manufacturing, or what kind of sloppy manufacturing practices may be involved. We have no option to sue if things go badly, as offshore generic companies have repeatedly been deemed to not be responsible for side effects in generic drugs since they are copying the original formulation of the original drug and the original drug and the generic drug have been approved by the FDA. That does not address, of course, the manufacturing process, which can vary from the original formulation via unacceptable practices of the manufacturer and which may be overlooked or unnoticed by the FDA. Many ingredients have been shown to be unacceptable by regulations, and by consumers who have become extremely aware of what they ingest.
The initial intent of generics was to provide lower costs medicines to the public, thereby reducing health care costs not only for the consumer, but for the many agencies who face astronomical health care costs. For people without insurance coverage, or with coverage which did not cover prescription costs, generics were a blessing. Now, the generic medications are working in reverse, increasing side effects or reducing effectiveness, which often results in hospitalizations, increased doctor visits, and the requirement of more medications. This of course, has the opposite effect of the original intent. In typical style, the government is stepping over dollars to grab for pennies, while concerns continue to fall on deaf ears of those in charge, with cost savings becoming a distant memory. Doctors hands are tied, based upon Medicare/Medicaid and big insurance companies requirements that generic drugs be the first choice and sometimes, only option. In many cases, if the patient or his doctor chooses a branded product, the consumer pays a penalty to his insurance company which can be as much as $100 per month, or the patient must pay out of his own pocket for the branded drug, which costs can be as much as $400 to $1000 for branded product versus a 90% reduction in cost if they accept a generic. It becomes a choice based solely on the dollars, but is this wise?
In my case, another generic beta blocker was prescribed and seems to be working without issue. Had I not the background in generic pharmaceuticals, I most likely would not have been able to pinpoint the basis of my symptoms which could have resulted in a diagnosis calling for yet more drugs to be prescribed, or if left unattended, could have resulted in some major event such as heart attack or stroke.
All drugs are not created equal, sadly, and consumers must arm themselves with as much knowledge as possible, and we must fight back against the tide of low quality and dangerous generics. I still believe in the concept of generic pharmaceuticals, but recognize that the lack of integrity in manufacturing, oversight and regulation leaves much to be desired, and questioned, in todays generic world.”
‘I just want one thing, American made nails,screws and bolts again. When I put a philips head screw into a piece of wood, I dont want to strip the head. When I drive a nail into a piece of wood, I dont want to bend it with the first blow. The same applies to the nuts and bolts I buy. [B]Make America make great stuff again.[/B] (Ooooh? a bumper sticker?)’
Well allowing milk products into Canada I hope to see cheaper cheese and milk here. At Costco it is $4.50 a gallon and $5.50 at regular store.
Maybe, but every year the share of worldwide patents filed by China —increases. Granted some are likely shoddy and some are likely
Chinese rip off of American IP.
But still, it can’t all be a sham.
It doesn’t make sense that you can outsource an entire supply chain—and invent the IP — without the suppliers eventually learning how to invent the IP themselves.
(Any grand piano player starts out by playing scales.)
When you say the chinese and indians “ have no clue WHICH product to develop”—the completed sentence should read “for the american market”
But they will know which products to develop for the Indian or Chinese market once they have the skills and know how to do so.
the flip side of this story is the ones making the rounds this morning about chinese hacking of chips in China bound for the USA. This completely kills the idea that there can be any real security in the high tech supply chain.
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