Featured Trump Admits His Trade Policy Would Mean Higher Prices

A 45% tariff (I don't support anything that high) along with some deregulation could easily move American clothing manufacturers from 2% to 20% of the market. There could soon be a tipping point where increased automation along with tariffs could make American clothing companies truly competative with Chinese companies, even for WalMart customers.

Any tariffs should be offset by tax reductions elsewhere, making American goods more affordable.

 

Forgive me for not being an idiot. Economics is a game of margins. Any tariffs on clothing imports, no matter how small, will boost American clothing manufacturing. (I don't pull numbers from the air. I'm not an idiot, so I'm able to make reasonable estimates.)

But, someone else might argue that 45% tariffs would be no help. But, they themselves, knowing their own limitations, would refrain from attempting to give us some idea of how much the tariffs would have to be to help.

 

If I talk to you anymore, you should start paying me tuition as your professor.

The manufacturing cost is a fraction of the retail cost, especially at a non-discount store that sells more expensive shirts. An identical shirt to a Chinese shirt only costs an American company a very little bit more to make. A shirt that costs three times a much is going to be higher quality and have a higher markup (premium charged by the store). It's a different shirt. American companies tend to produce higher quality products because they don't want to compete on price.

Many factors go into buying decisions, price is just one of them. There are people on the fence between the import and the American shirt. They might go with the import because it's cheaper. But, if the price difference were just a little bit less (such as resulting from a tariff), they'd go with the American shirt.

 

If it takes 10 minutes of labor to make and package a shirt, that's $0.50 labor cost in China and $2.00 for America. That means an American-made shirt costs $1.50 more to produce, due to labor.

A 45% tariff on a $8 Chinese shirt (a common dress shirt) is $3.60, making the Chinese shirt more expensive ($2.10 more expensive). For an $80 shirt (e.g. fine silk), the tariff would be $36 (and maybe 20 minutes of labor for the better quality shirt, making the Chinese shirt $32 more expensive).

If there's no one on the fence deciding between $125 and $35 shirts, then there's no one buying a $125 shirt, and therefore no such thing as a $125 shirt (no one is going to make what no one is buying). So, where do you get the hypothetical $125 from? Certainly not the cost of making a shirt over an identical $35 import.

 

I think it costs an American company $1.50 more to make a cheap shirt, vs. China. $4.00 more to make a reasonably nice dress shirt. Materials cost should be about the same wherever the shirt is made, for an identical shirt. Other than labor, manufacturing costs are about the same wherever something is made.

An identical Gitman Brothers shirt would only cost a few dollars less to make in China. Even a tiny tariff would make a Chinese GB shirt more expensive (even though GB shirts don't cost anywhere near their suggested retail price to produce).

 

If Walmart replaced all their imported shirts with American-made shirts that cost an additional $1.50/shirt, that would cost WalMart millions as they sell millions of shirts. WalMart customers are very price sensitive. Actually, with a little investigation, I found Walmart's cheapest shirts (patriotic t-shirts $4.88) are made in America.

I don't believe expensive brands of shirts cost significantly more to make because of where they're made. They cost more because of their quality, where they're sold, and, yes, a premium for not being made in Asia.

 

And how did you come to that figure?

uh huh

 

After a little investigation, I found I grossly over-estimated the amount of labor put into a shirt. It's about 5 minutes of labor for an average shirt, not 10 minutes as I offered earlier (high-quality shirts would have a little more labor involved). Even a small tariff could easily make American-made clothing competitive because labor is small fraction of costs (labor costs is the biggest factor in competitiveness between countries). A reduction in payroll taxes, or other taxes, by the tariff amount would keep consumer buying power the same and federal revenue the same.

 

"Almost 8 in 10 American consumers say they would rather buy an American-made product than an imported one, according to a recent Consumer Reports survey. And more than 60 percent say they’re even willing to pay 10 percent more for it..."
LINK

 

Probably the dumbest question to be asked the BB.