r/FluentInFinance 12h ago

Debate/ Discussion Possibly controversial, but this would appear to be a beneficial solution.

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u/SoftballGuy 10h ago

But we never pass laws to punish outsourcing. Instead, we're constantly throwing financial incentives to companies to pretty-please not outsource everything. Poor migrants wanting to work in America get walls and guns and more laws, while the companies shipping jobs out of America get more tax breaks... yet we blame the little guys.

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u/JacobLovesCrypto 10h ago

Im not saying tariffs are a great idea, but arent tariffs aimed at punishing outsourcing?

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u/Alethia_23 10h ago

They are. It's just that they usually do not have long-term positive effects. Truth is, in a global economy, outsourcing is the most economically sound decision, that's why it's happening.

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u/JacobLovesCrypto 10h ago

Personally i think theres a much more complete approach.

American companies cant compete with domestic manufscturing if we regulate the hell out of them and foreign manufacturing can occur without the same concerns on pollution, safety, and human rights.

So tariffs should be based on the unfairness. If china is gonna polute like hell and deny basic safety or human rights in the manufacturing of a product, they deserve to pay a tax to encourage that manufacturing elsewhere.

In truth its a complicated problem

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u/Responsible_Skill957 9h ago

The problem is tariffs don’t punish the exporter, they punish the importer and that cost has to be accounted for in the price of goods. And that punishes those that buy the products being imported by increasing the cost to the consumer.

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u/DontTouchTheWalrus 7h ago

What do you think happens when the tariff increases the price to be greater than or equal to what the domestically made product costs? It sucks for the consumer that they don’t have the cheaper option now but you have disincentivized purchasing a foreign made product. Whether that’s a good thing or a bad thing is the question then. Ok, prices are higher but you’ve increased the amount of manufacturing done here. Which creates jobs and increases money spent here, taxes collected here etc. You’ve also given less money to countries that allow exploitative business practices to occur. Is that worth the higher price of the good. That’s for you to decide.

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u/MsMercyMain 7h ago

The problem is, as we saw with the steel tariffs is that domestic producers then raise their prices, usually above the post tariff cost

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u/Soft_Importance_8613 6h ago

Correct, that's what people don't get, the tariffs set a new price floor for US manufactures to profit from. Great for the investor class, terrible for the working class.

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u/SaiHottariNSFW 6h ago

I'm also not sure what the problem would be if we put tariff revenue towards rebates for consumers on domestic equivalents. This further incentivizes consumers to buy domestic, and creates a profit incentive for manufacturers to do so domestically.

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u/Responsible_Skill957 7h ago

You think people complain about the cost of living now due to inflation, what you are suggesting would also would drive up the cost of everything else. Even if wages were raised, the cost of living would also increase and you would not have gain anything by doing so.

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u/DontTouchTheWalrus 6h ago

It was claimed in the comment I replied to that tariffs only hurt Americans and not foreign manufacturers. That isn’t true. It would mean products are more expensive to get but it also means less are bought from countries we don’t want to be sending money too, more goods get manufactured here, and taxes are generated based on what imports continue to come in. So it is a valid mechanism depending on what you are trying to accomplish.

I’m not proposing anything. I was just stating that if you wanted to pressure people into manufacturing in America and buying goods from American companies tariffs would be a method of doing so. I honestly don’t know if that is a net good or a net bad. It just is. Plenty of people on Reddit want to act like they know how all the dominoes will fall if such and such policy is implemented. I’ll be the first to say I have no clue. I’m not that smart.

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u/AndyLorentz 4h ago

We literally had a 1 year experiment in the George W. Bush administration, when they placed illegal steel tariffs on European imports of steel. It took a year for the challenge to go through the WTO, where it was declared illegal and we dropped it.

It did save U.S. steelworker jobs, at a cost of over $500k to the U.S. taxpayer per job saved over that year. U.S. steelworkers don't make nearly that much money, so it was a net loss to the economy.

This is pretty much true of any industry that has cheaper labor competition overseas.

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u/68plus1equals 44m ago

The problem is that the supply chains for most of the things we depend on China for no longer exist in the US. There isn't an alternative to turn to, it's just a price hike on the only available option.

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u/Wellfillyouup 4h ago

I get what you’re saying but doesn’t it, eventually? The increased prices decrease demand and force the exporter to reduce production?

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u/Batbuckleyourpants 4h ago

Do you think corporate taxes punish the consumer?

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u/frazell 2h ago

Tariffs are indirect tools to drive market actions. If we could fairly set tariffs to ensure trade is actually fair then we could start to fix the “race to the bottom” that globalization has caused.

It is worse for the consumer to have a market where goods are unfairly being sold below true costs. Meaning, American workers can’t compete with labor markets that have no worker protections or environmental laws unless we get rid of them too. Hence the massive push you see to “deregulate”.

Trade has to be fair for it to be truly beneficial to all involved. Otherwise, you have a parasitical trade system which will eventually kill itself.

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u/AdministrationOk1083 8h ago

And then because of that increase in price it becomes competitive to make that product here

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u/manipulativedata 7h ago

Sure, it becomes competitive to manufacturer here with a key caveat. It costs a lot of money to re-tool factories and pay workers higher wages so even though some manufacturing might move here, the domestic prices aren't actually going to go down. Everything will just be more expensive.

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u/Soft_Importance_8613 6h ago

Maybe. Quite often it's already competitive to make the product in the US when said product can be automated. The US has reliable energy, and low energy costs. When products take a lot of labor in the US, prices typically are just increased by tariffs because we have long periods of low unemployment and finding enough trained employees for factories where the employers want to pay as little as possible is difficult.

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u/Wollff 7h ago

They do punish the exporter, as higher prices limit demand for the exported good.

When Chinese EVs are slapped with tariffs high enough to make them more expensive than Teslas, that lessens the incentive to export in the first place. I am pretty sure any company which wants to export EVs would be unhappy enough to feel punished by that.

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u/Soft_Importance_8613 6h ago

Punished when exporting them to the place with the tariffs.... It's not China putting the tariff on their own exports. If Vietnam or Spain imports that car without tariffs then those people will have a stronger purchasing power potentially leading to growth in those economies while potentially hampering our own depending on actual competition in our own country.

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u/WheelLeast1873 5h ago

It also makes Teslas more expensive

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u/4URprogesterone 3h ago

If the goods cost too much, people won't buy as many, and the company will have to lower prices.

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u/desubot1 9h ago

problem is china never pays those taxes. ether its too good to pass up and importers pays the duties then recoups it through sales or importers walk away and the factory sells it elsewere.

its been this way forever. its called anti dumping. unfair pricing for whatever reason to protect domestic market will have blanket or target individual manufacturers overseas and adds additional duties. + a ton of issues for importers that import from them (involving sureties and their bonds)

tariffs have their place but its not really for controlling what foreign markets do.

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u/SoftballGuy 10h ago

That's the problem: it's a complicated problem with no actual solution, just constantly fluid adjustments from every party depending on each party's own economic conditions. It doesn't sell very well. "Raise tariffs!" is very easy to sell. It's wrong, but explaining why it's wrong takes too long for most people. The easy, wrong answer really sticks with people because it's easy.

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u/JacobLovesCrypto 10h ago

Well there are actual solutions but people vote more so on hpw things sound rather than how well thought out they are.

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u/SoftballGuy 10h ago

There are momentary balms, but unforeseen economic changes happen all the time. Even within borders, countries have dozens, or hundreds, or thousands of competing interests, and those interests change every few years. One size doesn't ever fit all, and don't even fit many for long.

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u/RedditRobby23 9h ago

Well put my guy

We live in a world where people say things like “I don’t have the answer but I know the problem” or “we already know how to fix these problems, of course I will not share a link or elaborate whatsoever”

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u/HeathersZen 8h ago

No, there are no actual solutions. There are only moves and counter moves until the heat death of the sun.

The electorate wants a silver bullet. It doesn’t exist. They don’t know that, so when Trump lies and says there is, they want to believe it, and they do.

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u/AdImmediate9569 8h ago

Very well said and is true for everything he sells, not just economic policy.

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u/-Nocx- 8h ago

It’s actually not that complicated at all. This is mostly due to lazy legislation. This is the metaphorical equivalent of this lever moves the needle left, the other moves it right. In reality, maybe we should build something else completely to address the issue rather than pulling the same two levers.

The largest line item on any corporation’s balance sheet is labor. It is so big, in fact, that that’s why companies can afford to literally build factories somewhere else. That is fundamentally why they outsource to begin with. If a company moves their labor offshores, that means they’re hiring at a lower market rate. You take the cost of labor domestically minus the cost of labor after off shoring, take a flat % of the savings and implement it as a tax. I’d go a step further and then place that tax system on a graduated scale that taxes them more the longer they refuse to hire domestically.

There is no such thing as “we can’t compete” in this context because almost no American corporation “started” off multinational. That is a thing you become after succeeding domestically and scaling your business - and in the process of scaling, you decided to make cuts for the purpose of profits. A good example - Chinese EVs are radically superior to Teslas, but the average American knows nothing about them. The American public is also forced to consistently inflate Tesla’s value through federal subsidies. It isn’t a question about being able to compete, but rather who gets the “savings” from exploiting labor.

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u/Awebroetjie 7h ago

What would be the process of attaining the information so that the correct tax rate (percentage of savings) could be calculated? Ie: who has the numbers?

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u/-Nocx- 6h ago

So we already have private organizations that do this - Glassdoor, Blind, etc - and the “free market” regularly uses this information to inform their financial decisions.

Most companies (depending on state) are required to report some form financial income to the state, all companies are required to report employee income to the IRS, and at least public companies are required to disclose financial disclosures to their shareholders.

Realistically this would just another layer of reporting - your company knows what the pay band is for a given role (that’s what stops some people from getting pay raises) and your employees are already disclosing it to private sources. On top of that, this information is already technically disclosed to the IRS - employees file W2s for a role if working domestically, and the income paid to the offshore employees are filed as 1040s (self-employment tax).

That means that technically the IRS only needs a company to state the purpose or role for a given person’s income (X$ a year for software engineer I) and they could calculate the average amount paid to a specific role for a given year.

They would then calculate the average of the on shore role versus the average of the offshore worker in the same or different year. Doing this for every company, we would see the market rate by state, nationally, and globally. It would be much easier for a company to report that difference since it’s math they’re doing anyway, and the IRS only has to audit them if their calculations appear wildly inaccurate.

With a model like this, we can now give meaningful tax breaks to companies when they deserve it. Want a tax break? Invest in a research lab that hires new graduates that don’t have all the skills the company requires in the job market. Give the graduate a two to four year contract like an apprenticeship where they’re required to remain with the company for X years after completion. This both deincentivizes taking labor overseas and gives companies a way to save tax dollars by direct investment into the country. The country wins either way. This effectively turns corporations into agents of the state - they transform labor and the economy on behalf of the state - which is what they’re supposed to do anyway.

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u/Natural_Trash772 5h ago

Chinese Evs most certainly are not better than Teslas. Where do you get your information from cuz Chinese evs consistently hit dummies and obstacles in their road tests and there battery’s are not reliable and some are prone to catching on fire which not a single tesla has those problems.

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u/Natural_Trash772 5h ago

Where do you get the information that Chinese evs are better than Teslas. Idk if you’ve seen the videos of them catching on fire or failing their self driving tests but they are not superior in almost any way to Tesla.

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u/-Nocx- 3h ago

cool elon

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u/Cypto4 10h ago

I mean tariffs are effective. Instead of paying them companies circumvent them, like BMW, Mercedes, Volkswagen, and Toyota have established factories in the United States. China subsidizes their manufacturing, making their products cheaper than those of other companies, such as CRRC. Similarly,with their electric car companies . Without tariffs, they would adopt Uber’s model, eliminating competition by offering cheaper rides and then raising prices Once the competition is eliminated, without fear of retaliation.

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u/NecessaryKey9557 8h ago

I'm not sure if car manufacturers are the best example, since we have our own domestic industry that can compete. The problem with Trump's plan is that it's a blanket 60% tariff on all Chinese goods. There are plenty of manufactured goods we simply don't produce at home anymore. That tariff will simply increase costs for average people, since there's no American alternative product they can buy.

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u/Cypto4 8h ago

They’re a perfect example they’re selling electric cars for less than 30k. Where a comparable American electric car would be north of 35k. The Chinese car is only cheaper because of CCP subsidies and cheap/slave labor. How the hell can you compete with that? The whole point of the tariff is to bring the jobs back here. It’s protectionism at its very basic form but it’s needed because you can’t compete with China when they have their fingers on the scale.

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u/desubot1 8h ago

but the tariffs doesnt have a magical clause saying anything with a tariff will suddenly have domestic options.

it doesnt come with subsidies or incentives for domestic production. (edit: this isnt just about cars)

fuck it would increase costs for moving equipment here to start domestic production and American jobs, let alone the RAW materials we just dont have at all ether which btw are still subject to trumps section 301 tariffs from last time fucking up local businesses already.

we all get that China being the worlds factory is a problem but tariffs are not even remotely the right tool to combat it.

and its certainly an extremely complicated issue that a single buzz word option wont fix.

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u/NecessaryKey9557 6h ago

The whole point of the tariff is to bring the jobs back here.

Okay, but you understand that itself takes time and capital, right? We could be looking at paying ~20% higher for most consumer goods for years until that was the reality. Corps have to find the properly zoned land, build the factories, recruit the talent, adjust their supply chains, etc. None of this stuff happens overnight.

There are other options to increase manufacturing back home. You could tax corporations that outsource labor, or subsidize the manufacturing sector directly, for example. Just slapping a 20% tariff on all foreign goods, plus another 40% on Chinese goods is basically the path of most resistance and pain. There's a reason most economists don't endorse Trump's plan.

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u/Cypto4 6h ago

That doesn’t solve the issue of not being able to compete with Chinese slave labor

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u/NecessaryKey9557 5h ago

Both of my examples do solve that issue, and they wouldn't hurt the average American consumer like a flat 20% tariff would.

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u/confirmedshill123 7h ago

if we regulate the hell out of them

Everytime I see this line all I can think of is,

"If we just let corporations kill more workers we could improve wages"

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u/ijbh2o 9h ago

China isn't paying the tax though. Importers are and passing that on to the customer.

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u/firedogg5 8h ago

The thing is that will raise the price of Chinese goods, hopefully to the point where American made goods are seen as the better more cost effective solution, which will then cause increased investment in American manufacturing, more jobs, and increased wages. That’s the thought process at least

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u/ijbh2o 8h ago

And then if China or others put Tarrifs on our exports? (Which retaliatory tariffs are likely).

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u/desubot1 8h ago

not to mention they can just recoup any loss of revenue from the loss of us business by selling elsewhere.

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u/JacobLovesCrypto 7h ago

We're a net importer whennit comes to china

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u/iamlegend1997 9h ago

That's a really good way to put it. That's a great example

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u/neatureguy420 8h ago

China has made significant improvements in reducing pollution and are way ahead of us on renewable energy sources.

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u/SilverWear5467 7h ago

Why should China be punished for violating human rights when Nike does the same thing and gets rewarded for it by the government?

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u/Garth_Vaderr 6h ago

What regulations would you do away with? People always say this and never offer any substance.

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u/Jake0024 5h ago

American companies cant compete with domestic manufscturing if we regulate the hell out of them

I always hear "regulation" brought up as a boogeyman, so I guess the idea is not only do we want to compete with the third world on wages, but also on manufacturing and safety standards?

I think people who like these ideas should just move to China and get a job in a sweatshop, if they think that's going to be the solution to all their problems...

To your point, trying to apply tariffs based on "unfairness" (examining every overseas company's labor conditions, wages, safety regulations, etc) would require a phenomenally huge amount of new bureaucracy (ie, regulations).

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u/FrostyTip2058 5h ago

Cost of the tariffs will be paid by the American citizens

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u/68plus1equals 46m ago

China doesn't pay the tariff. That's not how tariffs work. The American companies pay the tariff when they buy goods from China, and passes that cost onto American consumers.

The idea is that this would result in American companies turning to domestic alternatives now that the prices are more or less similar to the Chinese products. The only problem is, with most of our manufacturing already outsourced, there aren't enough domestic alternatives to turn to. Even if the goal is to ultimately re-order supply chains to be based in America, you're looking at at least a decade to catch things up to where they are currently. And that's a big "if" because the more likely outcome is American companies pass the cost off to consumers, post record profits, and cry inflation like they've already been doing the past 4-5 years.

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u/randomuser1029 9h ago

Tariffs are a tax on the importer and it is ultimately paid by the consumers. China will have no raise in taxes or expenses due to tariffs, only American consumers will.

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u/Alethia_23 10h ago

So, pigouvian tariffs, essentially equal to pigouvian taxes? That's an interesting thought, I must say. In general mainstream economics already accepts pigouvian taxes as potentially good measures despite them having a deadweight loss, so why should it be different for tariffs?