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61 sats \ 4 replies \ @Undisciplined 29 Apr \ on: American floor plan from China econ
This is not how tax incidence works (except in vanishingly rare cases). A fraction of the tariff will get passed on to American consumers, a fraction will be borne by foreign producers, and we will all be poorer from a reduction in voluntary exchange.
As noted, there are lots of offsetting factors. Many of these goods have consumption substitutes and all of them can be produced elsewhere. Both of those will increase costs on some dimension, but by less than the full amount of the tariff.
Boom
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Do you have any idea where this myth of perfect passthrough came from?
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I don't know if there's a formal name for this fallacy, but it's basically how a partially true effect gets exaggerated to a totally (and exclusively) true effect.
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But this specific thing gets repeated a lot. My guess is that it came from some anti-corporate tax campaign, but I don't know.
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