So it looks like tariffs are happening, which made me think “I’d have to pay 25% more if I wanted to buy a Wenonah, and my Southern neighbours would have to pay 25% more for an Esquif”.
Then I got thinking, though, and while I admit some ignorance on both taxes and business practices, could it be much more? As an example, I understand T-Formex sheets are made in Quebec, Canada, but I suspect the raw materials (ABS, PVC) probably come from a chemical company in the USA. I’d guess that the chemical company might well use natural gas/petroleum sourced from Canada as a feedstock. If the T-Formex sheet is then shipped to Wenonah to mold into a canoe, a tariff may have been paid three times before the canoe is exported (petroleum in to USA, raw plastic out to Canada, T-Formex sheet in to USA), without even accounting for the energy used in transport. Just one example, as I suspect carbon/kevlar boats made in Canada use resins and fabrics made in the USA.
Does anyone have ideas on what tariffs will do to the price of canoes on both sides of the border? I suspect even canoes made domestically will cost more (i.e. Canadians will pay more for Canadian canoes, and more still for those made in the USA, and Americans will pay more for American canoes and more still for those made in Canada).
It’s likely to be a great adventure, if they ever figure out what they are doing. In the example above, it will likely put many companies out of business as they become economically no longer competitive based on the price of the finished product.
Tariffs are applied every time something crosses the border into the US. The importer pays for it. Wouldn’t be surprised if the reaction is to add tariff to everything crossing the border into Canada too. Some of the parts in GMs and Fords cross the border five times.
I wonder if there is a way to find out who bought put options on US auto stocks on Friday.
I hadn’t considered the back and forth part (oil from Canada to US, material made from oil to Canada, boat made from material back to US) - interesting consideration.
But ignoring that - the duty may not be on the full price you pay if you aren’t the person importing it. Let’s say a Canadian boat sells for $1000 at a US dealer. If that dealer has a 30% profit margin, they paid $700 for it. So duty will be on what they paid ($700), not what you buy it at.
Hopefully Canada and Mexico make some sort of concession so Trump can declare a win and we go back to normal.
Thanks mowog3, as I didn’t know that. So my example above may be incorrect, but I think other things would likely be similar in that it would be difficult to source all the components from within one country. I sometimes laugh at recipes where a cake is proudly made “from scratch” as though the baker harvested and milled the wheat, grew the sugarbeets and processed them into sugar, and tended the chicken coops to collect the eggs. There is a lot of inter-connectedness in society, and I don’t pay attention often enough.
T-Formex is a laminate of around three layers of different plastics, including ABS. It probably starts out as heavy Canadian crude which is then refined in the US. I assume that the resulting refined petrochemicals are then sent back to the plastic manufacturers in Canada.
The resulting plastic sheets are then shipped to Canadian or American manufacturers to make thermaform boats among other things. The finished boats may then cross the Canadian border again when sold.
That’s a lot of potential tariffs for what the ultimate consumer gets.
North American manufacturing has evolved into a highly integrated system whose products — autos in particular, but manufactured goods more broadly — typically contain components from all three members of the pact, which may be shipped across the borders multiple times. Manufacturers developed this system not just because tariffs were low or zero, but because they thought they had a guarantee that tariffs would stay low.
Good observation, davbart. Ultimately, every thing is connected to every other thing. Therefore the wonder is supposing that anything can be considered without political implications
Well you are right in that worry is not going to help, but the “companies” never pay taxes. They collect taxes.
100% of the time it’s the end-consumer that pays all taxes. If a law makes a company pay 25% more they simply increase the prices 25%.
The tariff policy is NOT an instant fix. Nothing is. To get back on an even keel the plan will take 6-9 years. But it’s a plan with an actual end-goal of stopping the rampant waist of money and un-accountable ways the US treasury has screwed every American tax payer. So yes, the pricing of imported good WILL go up to all consumers but if the plan goes through the tax base of 38 to 44 percent will drop to 5-9 percent. So IMPORTED good will go up, but so will the paychecks of the wadge earners. If SSN was to drop to 5% and regular income tax was to be eliminated 100%, it leaves a lot more to spend for the average worker.
(Unless the government sabotages the plan 1st, which some of them are certain to try)
Um, interesting thing to say since tariffs are paid by the importer, typically a US company. Regardless it gets passed on down to the consumer rather than shafting the stockholders.
As @Kevburg said, tariffs are paid by the importer. Trump’s and other president’s thinking is that tariffs make imported goods more expensive than domestically produced goods. Therefore people will buy the less expensive domestically produced goods. In turn, international companies may move production facilities to the US to avoid the tariffs.
All this is complicated by varying manufacturing and labor costs in different countries, shipping costs, etc. In addition, for non-commodity items and items produced by smaller companies, like kayaks, there may be only one place of manufacture. The same may apply to components of a product. If a product is not available domestically, it just adds to the cost of the product.
But the bottom line is the consumer ultimately pays the tariff or pays for a more expensive domestically produced product. The importer is not just going to eat the tariff.
Problem with that simplified model is that US domestic production of aluminum pitiful, like 1/4 that of Quebec’s. Aluminum smelting costs depend on electricity costs. Places that have cheap electricity include Canada (hydro), Iceland (geothermal), Russia and Saudi Arabia (oil). Smelters are built next to dams and power plants, so US would have to build dozens of power plants to replace Quebec as a source. By the time the power plant engineering (much less building) was completed Trump won’t be president so no company is going to do it.