The tax is 145% on Chinese imports. To preserve relative margins companies need to increase prices by 145%. Obviously, you are not going to buy the extra yard camera that was 100 dollars last week but will soon be 250.
The tariffs are effectively a 30-150% price increase on all retail products, along with some marginal price increase on all manufactured goods. Given the nearly assured recession, it is unclear how willing American consumers and corporations are to eat this tax. Some businesses will take it out of the margin, others will pass it along.
> To preserve relative margins companies need to increase prices by 145%.
Not true. If you have watched Shark Tank you have seen that products cost, as an example, $6 landed, but retail for $24. Tariffs are 145% of $6, so around $9. So they only have to increate the retail price from $24 to $33 to keep the same profit margin. In this example that's a 37% increase, not 145%.
_relative_ margins as in percent, $6 with 145% tariff is $14.7 which means to maintain the 75% margin you'd have to jack the price up to nearly $60. I agree that you don't necessarily need a 75% margin to do business, but it can't stay flat either because you're floating more than double the money on inventory. In reality prices for cheap crap with huge margins will probably only go up let's say 50% but items that have thin margins will definitely more than double.
And tariffs are collected at arrival, so companies can be obligated to pay double to receive goods they already purchased when huge tariffs suddenly appear. That can mean spending a significant amount of extra money on goods they may not be able to sell profitability.
The tariffs are effectively a 30-150% price increase on all retail products, along with some marginal price increase on all manufactured goods. Given the nearly assured recession, it is unclear how willing American consumers and corporations are to eat this tax. Some businesses will take it out of the margin, others will pass it along.