From economist John Cochrane
A note on tariffs from the real world
…as I hear Sir Niall say that there has been no impact from tariffs…it’s coming, and it’s a tidal wave for the American consumer. All tariff pauses just ended on August 8…we all brought in as much previously (lower) tariffed goods before that, and most fall merchandise was here in the spring and early summer…so we are still selling goods that didn’t have the latest tariff burden. But we are all raising prices slowly and carefully as the tariffed inventory gets sold (remember, accounting wise, we have a cash hit paying tariffs upon receipt, but we have a P&L hit when we sell the tariffed goods). You will start to see the margin hits a little in 3Q and a lot in Q4. But…we are all trying to hold prices through the key holiday … because we all believe the American consumer is going to be smacked by raised prices everywhere. So many are holding back to try to eke out a good holiday. But we all know that come January, we have massive margin hits (our sector was already the highest tariffed at ~12%, and now sits at ~33%), consumer slow down, and we have to raise prices roughly 10-15% to cover tariffs…and we also all know that our elasticity is roughly -1.0… so there is a major shock to retail and the economy coming…it’s just masked right now because we are selling older inventory, and trying to hold prices for holiday.
I've said this before. If the tariffs stick, consumers will end up paying the bulk of the increase. Companies and importers may eat them for a while but eventually the cost will be passed on to the end consumer.
In the end, tariffs will be an invisible sales tax on consumers. Regressive as hell. Hitting the working class harder than the wealthy.
But... we won't have to raise taxes on Elon.
