US businesses and consumers pay 90% of tariff costs, New York Fed says

Original Article ↗ Hacker News Discussion ↗

What Tariffs Are and Who Pays

  • Commenters broadly agree: tariffs are import taxes, functionally similar to sales taxes, and mostly paid by US businesses and consumers, not foreign countries.
  • Multiple examples (e.g., FedEx/DHL brokerage bills, small importers, hardware startups) illustrate costs being passed directly to buyers.
  • Several note this makes tariffs regressive: lower-income households spend more of their income on goods, so bear a disproportionate burden.

Intended vs Actual Economic Effects

  • Supportive view:
    • Tariffs are meant to change domestic behavior: make imports costlier so domestic production becomes viable, encourage onshoring, and push foreign governments to lower their own tariffs on US goods.
    • Some claim evidence of localized gains (e.g., packaging/logistics growth, historical auto-industry protection, niche manufacturing upticks).
  • Critical view:
    • Broad, unstable, and input-targeting tariffs raise costs for US manufacturers too, discouraging factory investment and hurting downstream industries (classic “steel jobs saved, more jobs lost using steel” argument).
    • Many goods simply have no domestic alternative; consumers just pay more for the same imported item.
    • Automation and capital intensity mean even successful reshoring wouldn’t create many jobs.

Implementation Under the Current Administration

  • Strong criticism that the current tariff regime is:
    • Ad hoc, politically motivated, and used as leverage or punishment rather than part of a coherent industrial strategy.
    • Legally shaky (emergency powers), making long-term business planning risky.
    • Prone to carve‑outs and favoritism, encouraging lobbying and “tribute.”

Political Messaging and Public Understanding

  • Many see the “China pays” narrative as deliberate propaganda; some argue supporters repeat it knowingly as a loyalty signal.
  • Others say most people at least vaguely understand tariffs are meant to protect domestic industry, but underestimate that they themselves are paying.
  • Analogies to sugar taxes and VAT are used to explain incidence; discussions highlight widespread confusion about basic tax concepts (marginal rates, refunds, etc.).

Macroeconomic and Fiscal Considerations

  • Some frame tariffs as a backdoor tax increase that shifts the burden from income/wealth taxes to consumption.
  • Debate over whether tariffs meaningfully address deficits or trade imbalances; skeptics see little visible inflation spike attributed solely to tariffs but note pervasive price rises.
  • A minority argue that, in a deglobalizing world, some kind of long‑term, bipartisan, strategically targeted tariff policy may be necessary—contrasting that ideal with current “shoot‑from‑the‑hip” practice.