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dennisgorelikThe reason why Trump has setup tariffs - is because many Trump's constituents - are clueless protectionists who poorly understand how international trade and economics works.
When it comes to supporting people who poorly understand economics, the main thing is declarative support in nice sounding words.
Real tariffs are not necessary for such declarative support.
Therefore, private businesses will be able to bypass most of these tariffs.
An iPhone manufactured in China (a subject to a 34% tariff on Chinese goods) — will instead be imported through Singapore with a 10% tariff.
The iPhone will be shipped as semi-finished components with a total value of $5.
As a result, the import duty (tariff) will be:
$5 * 10% = $0.50 per phone.
In the U.S., the iPhone will be finalized into a finished product: iPhone software will be installed on the semi-finished product, and it will be packaged as an Apple iPhone.
This "assembly" will cost $1 per iPhone.
Another $1 per iPhone will be spent on lobbying politicians to allow such an import scheme.
After that, the 'iPhone assembled in the USA' will be sold for $1,000.
The costs of tariffs, assembly, and lobbying (in the price of an iPhone) will thus amount to:
($0.50 + $1 + $1) / $1,000 = $2.50 / $1,000 = 0.25%
As a result, the iPhone will remain cheap, and protectionists will continue to support Trump.
When it comes to supporting people who poorly understand economics, the main thing is declarative support in nice sounding words.
Real tariffs are not necessary for such declarative support.
Therefore, private businesses will be able to bypass most of these tariffs.
An iPhone manufactured in China (a subject to a 34% tariff on Chinese goods) — will instead be imported through Singapore with a 10% tariff.
The iPhone will be shipped as semi-finished components with a total value of $5.
As a result, the import duty (tariff) will be:
$5 * 10% = $0.50 per phone.
In the U.S., the iPhone will be finalized into a finished product: iPhone software will be installed on the semi-finished product, and it will be packaged as an Apple iPhone.
This "assembly" will cost $1 per iPhone.
Another $1 per iPhone will be spent on lobbying politicians to allow such an import scheme.
After that, the 'iPhone assembled in the USA' will be sold for $1,000.
The costs of tariffs, assembly, and lobbying (in the price of an iPhone) will thus amount to:
($0.50 + $1 + $1) / $1,000 = $2.50 / $1,000 = 0.25%
As a result, the iPhone will remain cheap, and protectionists will continue to support Trump.
