Let’s say a bottle of Canadian Maple Syrup is $5 before.
25% Tariff is $1.25
Let’s say the company makes $2 on each bottle before tariff. They really need to make $2 per bottle to cover expenses
So if a company still wants to make $2 a bottle still.
If they sell for $6.25 to try to cover the tariff (25% increase)
The tariff becomes $1.56
Instead of making $5, they would make $4.69.
Instead of $2, they would make $1.69
If they sold the bottle for $5, paid $1.25 tariff
They would make 75 cents
The number for $5 is $6.67
If the company sold the syrup bottle for $6.67. Payed $1.67 in tariff (25%). They would make $2.
Now, of course, they want to sell it for $6.67. Will people pay the increased price?
They can’t just keep selling them for $5 and make basically a 1/3 of their previous profit.
Prices have to go up. How much is up to the consumer.
If the consumer is willing to buy Official Canadian Maple Syrup 🍁 for $6.67. The consumer is paying the whole $1.67 tariff.
An interesting thing happens when people pay $8. The syrup company makes an extra $1, Government gets $2 tariff. It’s a win for everyone, but the consumer that lost $3. (Kind of scary if Trump gets a Maple Syrup company in Canada, goes around, ignores, or pays himself the tariff and sells a bottle for $5. Both are true Canadian Maple Syrup, it just has his name on it. Are you going to buy the $5 or the $8? Even if you buy the $8, he gets $2)
The consumer can’t win. Free economy is better.
~33% increase covers a 25% tariff
If the price settles at $6.
Company pays 50 cents
Consumer pays $1
Trump gets $1.50
Who even is in charge of the “tariff funds”?
Like people are happy with having to pay $1 to get the company to pay 50 cents? Like that’s a win?
Sad reality is Americans should not buy anything with a tariff. Paying a premium to help support Canada seems like a good thing but if everyone does it and everyone pays 33% more. The tariff funds makes out like a bandit all thanks to the consumers.
TL;DR: Company facing a 25% tariff will look to raise prices 33%. If they can they are fine or better. Consumers lose. I really like Vermont Maple Syrup
Would you mind changing “instead of making, they make” by some other precise verbs? Your explaination seems very interesting but, probably du to my poor english, I feel like you saying the same thing over and over while changing the numbers and I can’t grasp your explanation.
I see. Since the tarif is proportionate to the final price, the final price needs even higher than the initial price times (1 + tarif) in order to keep the profit the same.
Let’s say a bottle of Canadian Maple Syrup is $5 before.
25% Tariff is $1.25
Let’s say the company makes $2 on each bottle before tariff. They really need to make $2 per bottle to cover expenses
So if a company still wants to make $2 a bottle still.
If they sell for $6.25 to try to cover the tariff (25% increase)
The tariff becomes $1.56
Instead of making $5, they would make $4.69.
Instead of $2, they would make $1.69
If they sold the bottle for $5, paid $1.25 tariff
They would make 75 cents
The number for $5 is $6.67
If the company sold the syrup bottle for $6.67. Payed $1.67 in tariff (25%). They would make $2.
Now, of course, they want to sell it for $6.67. Will people pay the increased price?
They can’t just keep selling them for $5 and make basically a 1/3 of their previous profit.
Prices have to go up. How much is up to the consumer.
If the consumer is willing to buy Official Canadian Maple Syrup 🍁 for $6.67. The consumer is paying the whole $1.67 tariff.
An interesting thing happens when people pay $8. The syrup company makes an extra $1, Government gets $2 tariff. It’s a win for everyone, but the consumer that lost $3. (Kind of scary if Trump gets a Maple Syrup company in Canada, goes around, ignores, or pays himself the tariff and sells a bottle for $5. Both are true Canadian Maple Syrup, it just has his name on it. Are you going to buy the $5 or the $8? Even if you buy the $8, he gets $2)
The consumer can’t win. Free economy is better.
~33% increase covers a 25% tariff
If the price settles at $6.
Company pays 50 cents
Consumer pays $1
Trump gets $1.50
Who even is in charge of the “tariff funds”?
Like people are happy with having to pay $1 to get the company to pay 50 cents? Like that’s a win?
Sad reality is Americans should not buy anything with a tariff. Paying a premium to help support Canada seems like a good thing but if everyone does it and everyone pays 33% more. The tariff funds makes out like a bandit all thanks to the consumers.
TL;DR: Company facing a 25% tariff will look to raise prices 33%. If they can they are fine or better. Consumers lose. I really like Vermont Maple Syrup
Would you mind changing “instead of making, they make” by some other precise verbs? Your explaination seems very interesting but, probably du to my poor english, I feel like you saying the same thing over and over while changing the numbers and I can’t grasp your explanation.
So if a company still wants to make $2 profit per bottle.
Company raises price to $6.25 to try to cover the tariff (25% increase)
The tariff becomes $1.56 ($6.25 × 25%)
Instead of selling for $5 price, they would sell it for $4.69 effectively ($6.25-$1.56)
Instead of making $2 profit, they would make $1.69 profit ($4.69-$3(production cost))
If they still sold the bottle for $5, paid $1.25 tariff
They would make 75 cents of profit ($5-$3(production cost)-$1.25(tariff))
I see. Since the tarif is proportionate to the final price, the final price needs even higher than the initial price times (1 + tarif) in order to keep the profit the same.
Starting Price / (1-Tariff %) = Final Price Needed to Break Even
$5 / (1-.25) =
5/.75 = $6.67
If an item was $5 and there was a 30% tariff
5 / (1-.30) = $7.14
If there was a 30% tariff and the syrup company wanted to keep same profit they would have to sell each bottle for $7.14.
$7.14 × .30 = $2.14
$7.14 - $2.14 = $5
No, because (1 + tariff) isn’t enough to keep up with the tariff because as the price goes up, the tariff also goes up.
Like in the example going from $5 to $6.25 (5 × (1+.25)). Would result in 31 cents less per bottle.
It needs to be ~33% more or $6.67 for the syrup company to keep the same profit with a 25% tariff.
Final Price × Tariff % = Tariff Amount
Final Price - Tariff Amount = Cost of Good Sold
Cost of Good Sold - Expenses = Profit
So if you need $2 profit
$2 = (Final Price - (Final Price × Tariff %)) - Expenses
$2 = (X - (X×.25)) - $3
$5 = X - .25X
$5 = .75X
X = $6.67
Formula would be
Profit = (Final Price - (Final Price × Tariff %)) - Expenses
Thanks !
No problem!