With a tariff, one of two things must happen.
1- The producer holds price steady and absorbs the export cost increase.
2- They pass the tariff along to the consumer by increasing the price of the product.
If domestic supply isn't sufficient to fill 100% of domestic demand, then prices must go up. The consumers who weren't able to purchase at domestic prices must now purchase at import prices that include a tariff. But rather than having one group of consumers pay a low domestic price and another group pay the high import price, the market is quite good at simply finding the equilibrium price. IOW, the price of both domestic goods and import goods increases until the quantity demanded is satisfied.
This might seem good to someone who doesn't know any better because it will seem like the profit margins of domestic companies increased while margins of foreign companies decreased. This might be true occassionally, but usually it means that domestic producers margins increased considerably, while foreign margins went mostly unchanged. And who pays for this?
Domestic Consumers.
I now have to pay a higher price than someone in germany pays for the same Sony laptop.
The way to combat tariffs against our goods is not to place a reciprocal tariff. The threat of tariffs might be a good tool if we are a large consumer of particular goods. IOW, threatening a reciprocal tariff might be used to prevent a tariff placed against our own goods, but actually placing the reciprocal tariff simply hurt both countries involved while relatively benefiting all other countries who were smart enough to avoid tariffs all together. [/B]
