the increase won't be as dramatic as the crazy percentages we're hearing about, but it will be significant over time.
consider a business that sells a specialty item for $100.
it's imported from a european nation now subject to a 10% tariff. The business model is buy the item for $30, but you have $65 in expenses -- shipping fees and land transport to your store, then overhead to operate a retail outlet (rent, labor, advertising, insurance, etc.), so you're margin in the end is only $5.
But it's only the raw import that's subject to the tariff, and that costs $30, so that's basically a $3 tax. If you pass 100% of it on to the consumer, the end price goes from $100 to $103, still "only" a 3% increase.
but given how this affects virtually all imports, purely domestic sellers will raise prices a similar amount, or maybe slightly less, because why not, free money.
all of this inflation, and it's practically mandated inflation. it won't be massive, but it will be significant. we're headed into stagflation, and more than likely, in 2026, donnie will find a new fed chair that will lower interest rates to boost the economy for him, which may help growth but will then cause inflation to skyrocket....
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However, this is describing a particular tariff % and product cost % (fairly low at 10% and 30% respectively) in a particular importation and sales model scenario where the effects may be relatively small on end prices.
There are other things to consider, though, the most obvious in my mind being that this piece: " $65 in expenses -- shipping fees and land transport to your store, then overhead to operate a retail outlet (rent, labor, advertising, insurance, etc.)" could also go up due to tariffs, iow many of the companies doing that work for you may see *their* costs rise due to tariffs (if building costs go up, rent likely goes up for example). So if that $65 becomes $75, now the cost to get the product to the point of sale is 75+33 = 108 instead of the previous $95. So now you have to raise the price to $113 to recoup your costs, and even then your previous 5% margin is lowered.
What if a company as a normal matter of course borrows money to construct their products then pays it back with their sales? Now you're borrowing $33 vs $30, effectively your interest rate increases. Further eroding your profit margin. Now you're thinking your $100 thing needs to be $115.
And then there's the fact that it's 10% NOW, but who knows what it might be later? Maybe the company thinks it needs to go to $120 as a hedge against potential future rising costs due to higher tariffs?
Also what about an outfit like a car maker where the cost of the imported parts to build the car is likely higher, %-wise vs. the sales price of the vehicle than the 30% in your example? Every bit you go up from that 30% assumption, the bigger the hit on the end price, yeah?
