reading my own comment, i wonder if the tariffs are the less expensive alternative. I wonder if the cost of wages would result in significanlty (~100%) greater prices?
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If this is your original question,
I will pay for what I need regardless of the cost.
If stuff gets too expensive, which is totally subjective, I may skip some stuff I want but donāt absolutely need.
As for regulations, there was a time when they were deemed benevolent as a way of protecting us as citizens. Unfortunately, the oligarchs donāt see it the same way.
Rich
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Ask the stock market, your 401K plan, etc.
That was going to be my next comment. The tariff is based on the ālandedā cost. So the manufacturer is seeing the increase in their ācost to produceā, which is likely only 20% or 25% of the āmarket priceā.
So the question is do they have the financial strength to just make it a pass thru, or are they so cash strapped and in debt they have to mark up the tariff increase?
In the tough economy of the late 70ās and early 80ās, Irv Athearn made a killing because his tooling was paid for and the company was debt free. He kept his prices lower while other had to raise theirs and was even able to come out with new products capture a larger market share.
Which is just the opposite of stories I hear about how many of these companies are operating todayā¦
So a $100 item with a landed cost of $25 now costs the āimporterā $31.25. Can he afford to just sell it for $106, a 6% increase? Or does he need get $125 because he owes the bank too much?
Sheldon
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i was curious
google say the average factory worker pay in the US is $17, not $25 as I suggested.
and google says in China the avg monthly pay is $1500 or $5.70 based on avg of 48 hr work week
so avg wages are ~190% higher in US
seems like 25% tariffs are the less expensive alternative.
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if a $150 product has an import value of $100 and a $25 tarif, wouldnāt the selling price go from $150 to $175?
if wages amount to 50% the production cost, would manufacturing it in the US be $196? would the hobby shop price be closer to $300?
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Edit: I was wrong
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looks like wages caught up with inflation the past few years.
why would prices go up if people couldnāt afford to pay those prices?
it helps to back statements with facts
this is interesting stuff.
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Greg,
I stand corrected- the last couple years has been very beneficial in terms of wage growth. Hopefully it continues.
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Hello
Tariffs ā¦yawn, I buy what I need and pay the price to receive. The Tariffs as I see it, using Balck Jack an example.
Playing 2 hands, bets are of equal value
First one wins, second one loses
This is known as a push-pull, a zero-sum gain.
Every year prices always increase, in case you live under a rock and donāt know this.
The tariffs will level the playing field I welcome that idea.
Pep
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Where did you get those numbers? The manufacturers are not paying $100 for something you buy for $150. They would be out of business in a week.
If you are marketing direct to consumer you can get by on paying $40 or $50 and selling for $100.
But if you sell to dealers, who then sell to consumers, your landed cost needs to be 20%-25% of the expected cost to the consumer.
The tariff is based on what the manufacturer ACTUALLY pays the factory in China. Not of some yet to be established consumer price.
Sheldon
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Prices are controlled by two primary factors - market - but more importantly cost to produce.
In a small industry like model trains the ācost to produceā is the real price driving factor.
If you canāt charge enough to make a profit, the product will go away - no question.
Sheldon
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All I know is, Iām too poor to buy fancy new trains, so I have to limit my area of interest to old used stuff
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i simply assumed the cost was 50% of the price (i.e. 100% markup)
if the import value is $40 and is only 20% of the price, the price is $200.
the tariff would be $10 on $40, possibly raising the price by the same amount to $210, or if the mark-up remains x%, then $250
Sure, for the manufacturer. But, you are forgetting about the consumer who, in reality, is paying the tariff. A factory worker making $17 an hour cannot afford to own a car, pay rent, and support a spouse and 2 kids. $17 an hour times 2,000 hours is $34,000 annually. Not gonna go far in todayās economy. Now add a 25% tariff to rent, groceries, car payments, etc.
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I mean no offense, but obviously you have never been involved in a retail or manufacturing business.
Letās go back to the item with a $100 retail or street price.
The landed price is likely $30 max, and more likely only $20 or $25.
At $25 the tariff makes it $31.50 If that $6.25 is just passed thru, the new street price is $106.25.
If the tariff is marked up the new street price is $125.
News flash, manufacturers and retailers do not talk in terms of āmarkupā, they think in terms of āgross profit marginā. In other words, a hobby shop that buys a $100 retail item for $60 has a gross margin of 40%.
It takes a gross margin of 30%-40% to run most small to medium retail operations.
The real question about prices is still what is the debt service load of the importer? Can he afford to just pass the tariff thru. Or does he have to borrow more money to pay the tariff?
Sheldon
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Out of 197 countries, the U.S. ranked 137th in the average amount of tariffs.
A misleading part of this ranking is that many countries, including the European Union, have a VAT. If that tax was counted as a tariff, the U.S. would rank even lower.
The U.S., before the latest tariffs, was lower than Canada, Mexico, and China, and was much lower than European countries.
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To explain further, back in the day, when trains were made here and sold in local shops.
$100 retail item (no discounting)
local shop paid $60 from distributor
Distributor buying in case lots and high volume paid $40 (or a little less) from Manufacturer.
Manufacturers cost to produce - $20
Today, with discounting and distributors mostly cut out of the picture.
$100 MSRP, typically sold for $80 by retailer/internet store who paid $50 direct from manufacturer who now has to deal with more customers and smaller orders.
Manufacturer who outsources production to China has a landed cost of $25.
If he has money in the bank, he can just pass the $6 tariff thru and make the same money. Sales will not be noticeably effected.
But if he canāt afford that, sales will be affected at the new discount street price of $100
Sheldon