Brexit discussion thread XII (Please read OP before posting)

brickster69

Bit cynical wrote: »

However they may not get to pass on the costs in full. If the only source of the product is from imports at a given tariff then the full costs can be passed on. However if the importer is competing with domestic producers or imports from low or non-tariff countries then it is possible that only part of the tariff can be recouped thus lowering profit.

That's up to the seller he can sell the goods for less than what he paid for them. At the end of the day he paid the tariffs.

Bit cynical

brickster69 wrote: »

That's up to the seller he can sell the goods for less than what he paid for them. At the end of the day he paid the tariffs.

However I was talking about how much of it he can pass on.

It is much the same as any other cost. If you are a monopoly for a product with inelastic demand and, say, your electricity costs go up, then you can pass on most of the increased cost to the consumer. If, however, you have a competitor whose electricity cost has not gone up, then you can't pass all that on and must absorb some of the cost.

brickster69

Bit cynical wrote: »

However I was talking about how much of it he can pass on.

It is much the same as any other cost. If you are a monopoly for a product with inelastic demand and, say, your electricity costs go up, then you can pass on most of the increased cost to the consumer. If, however, you have a competitor whose electricity cost has not gone up, then you can't pass all that on and must absorb some of the cost.

If an importer buys a product for £10 and pays the correct tariff eg. 10% he can sell it for 1 million Euros if he wants or he can sell it for nothing.

newport2

Bit cynical wrote: »

Brickster is correct, I'm afraid. The importer pays the tariffs to the importing country. However the importer is free to pass on costs to the consumer.

Like a car manufacturer pays for the cost of building a car. However, the manufacturer is free to pass on costs to the consumer. So BMW pays for all its cars, not the customer who buys it. Gymnastics.

brickster69

Banned.

Bit cynical

newport2 wrote: »

Like a car manufacturer pays for the cost of building a car. However, the manufacturer is free to pass on costs to the consumer. So BMW pays for all its cars, not the customer who buys it.

Well, it is like BMW pays corporation tax which is one of its costs and will be reflected in the price of its cars. But generally we do not regard the consumer as paying corporation tax though of course that is the source of the money for BMW.

brickster69

newport2 wrote: »

I agree, doesn't really hold up when it's said back to you, does it?

FFS. Last time !

If you import something from another country that you have to pay tariffs on.

You pay for the goods, and then you pay any taxes to get it into your legal ownership. It is your responsibilty to do this. You cannot say to the seller i want my money back, he has done his job. If the government take them off you because you wont pay the taxes, hard luck.

Once you have received the goods ( because you have paid the duties ) they belong to you and then you can do what you want with them.

brickster69

Plus, i must say. It is the importers responsibility that the goods are fit for purpose in the EU, not the exporters.

moon2

brickster69 wrote: »

Plus, i must say. It is the importers responsibility that the goods are fit for purpose in the EU, not the exporters.

Arguing about who legally pays the import duty is a bit of a straw man. The generally accepted impact of tariffs is to increase the cost to the consumer by an equivalent amount. The importer doesn't generally bear the cost, neither does the exporter.

While this may occur in special short term circumstances, it is not common.

brickster69

moon2 wrote: »

Arguing about who legally pays the import duty is a bit of a straw man. The generally accepted impact of tariffs is to increase the cost to the consumer by an equivalent amount. The importer doesn't generally bear the cost, neither does the exporter.

While this may occur in special short term circumstances, it is not common.

As far as i can understand the question was who pays the tariffs, and that is the importer. It is the same the world over.

Leroy42

So is that the Brexit dividend, UK companies get to absorb additional tariffs?

Sunny uplands all round.

brickster69

The exporter bears no cost. If Aston Martin cars sell for 1 million euros and one gets sold to France then if tariffs are involved the importer pays the tax. Aston Martin makes the same profit regardless. Same the other way round.

moon2

brickster69 wrote: »

As far as i can understand the question was who pays the tariffs, and that is the importer. It is the same the world over.

I saw that question and I interpreted it differently. I believe the difference is you took a literal and narrow interpretation of the sentence. I believe the OP, like my own reading of the question, was referring to who bears the final cost of a tariff.

If that's all we're splitting hairs over then we can probably all agree that you're correct in the literal sense, and the consumer is the one who bears the cost at the end of the day.

Everyone's right!

brickster69

Leroy42 wrote: »

So is that the Brexit dividend, UK companies get to absorb additional tariffs?

Sunny uplands all round.

Up to them, is it the same with EU companies ?

brickster69

moon2 wrote: »

I saw that question and I interpreted it differently. I believe the difference is you took a literal and narrow interpretation of the sentence. I believe the OP, like my own reading of the question, was referring to who bears the final cost of a tariff.

If that's all we're splitting hairs over then we can probably all agree that you're correct in the literal sense, and the consumer is the one who bears the cost at the end of the day.

Everyone's right!

No, you are wrong. The entity who pays the tariff is the importer not the end consumer. It is simple !

brickster69

correct horse battery staple wrote: »

And where do all UK based car assemblers get most their parts from? Do tell...

What has that got to do with it ?

moon2

brickster69 wrote: »

No, you are wrong. The entity who pays the tariff is the importer not the end consumer. It is simple !

Stop being deliberately obtuse.

brickster69

moon2 wrote: »

Stop being deliberately obtuse.

Not being obtuse. Just stating fact !

Professor Moriarty

brickster69 wrote: »

The exporter bears no cost. If Aston Martin cars sell for 1 million euros and one gets sold to France then if tariffs are involved the importer pays the tax. Aston Martin makes the same profit regardless. Same the other way round.

Funny you mention Aston Martin.

The luxury carmaker Aston Martin Lagonda has slumped to £13m loss over the most recent three months, blaming tough trading conditions in the UK and Europe and weak sales of its Vantage two-seater sports car.

The 106-year-old British marque has had a torrid year since floating on the stock market last October with its shares priced at £19, valuing the company at £4.3bn. The shares have since slumped, diving below £4 at one point in August, as sales have fallen amid “continuing macro uncertainties”. They were down 3% at 404p at midday, valuing the company at just over £900m.

And:

Andy Palmer, the chief executive, acknowledged that things had not gone as expected. “We didn’t expect the downturn in the market, we didn’t expect the delay of Brexit … We are working to the plan and DBX is a key part of that plan.”

brickster69

correct horse battery staple wrote: »

And where do all UK based car assemblers get most their parts from? Do tell...

Where does Airbus get it's wings for planes from ?

brickster69

Professor Moriarty wrote: »

Funny you mention Aston Martin.

The luxury carmaker Aston Martin Lagonda has slumped to £13m loss over the most recent three months, blaming tough trading conditions in the UK and Europe and weak sales of its Vantage two-seater sports car.

The 106-year-old British marque has had a torrid year since floating on the stock market last October with its shares priced at £19, valuing the company at £4.3bn. The shares have since slumped, diving below £4 at one point in August, as sales have fallen amid “continuing macro uncertainties”. They were down 3% at 404p at midday, valuing the company at just over £900m.

And:

Andy Palmer, the chief executive, acknowledged that things had not gone as expected. “We didn’t expect the downturn in the market, we didn’t expect the delay of Brexit … We are working to the plan and DBX is a key part of that plan.”

It's not my business.

https://www.db.com/ir/en/share-price-information.htm

Gerry T

What a load of bo**ox. For those that say the imported pays, they are correct. But what your leaving out the imported is someone living in the country bringing in the goods. So a retail shop in the UK buys fruit from Spain (in a hard brexit scenario). That retail shop has to pay for the tariff. This is now a cost to the UK company. It can either pass on the cost (rising prices) or absorb the increase cost (lower profits) or cut other costs (employee wages) to make the same profit. Now which do you think the UK retail shop will do, with tariffs typically around 40 to 50% on certain food groups, it certainly won't be cutting company profits.
And even if company profits were the only cut that would result in lowering corporation tax, meaning the UK Govt has to cut expenditure or possibly increase PAYE taxes.
Saying the importer pays the tariff is to imply that the 3rd country is paying the tariff and bringing money into the UK. That's false.

One minor point I also read, the UK contribution isn't 9b, it's 7.5b which factors in research grants payed directly. This will also dry up. A minor point.

Gerry T

brickster69 wrote: »

Where does Airbus get it's wings for planes from ?

This is a good point and one that I'm sure Airbus is carefully watching. Logically Airbus will either move wing production to the EU or move everything bar the wing to the UK. Airbus will have to also factor in where the wing gets it's parts from, if not all locally manufactured in the UK then moving wing production would make a lot of sense.
I'm sure Airbus will say nothing until it see's the nature of the future trade deal. if a FTA on goods is reached then the status quo might and I say might remain. The other big issue will be non trade barriers, such as logistics, delays, added paperwork, etc..

SantaCruz

brickster69 wrote: »

No, you are wrong. The entity who pays the tariff is the importer not the end consumer. It is simple !

It is indeed simple. The 'extra' money you were touting as coming from tariffs is coming from within the same country.

A ridiculously naive misunderstanding of basic economics, which you've continued to double down on.

It's fortunate you have no credibility to lose.

brickster69

Gerry T wrote: »

What a load of bo**ox. For those that say the imported pays, they are correct. But what your leaving out the imported is someone living in the country bringing in the goods. So a retail shop in the UK buys fruit from Spain (in a hard brexit scenario). That retail shop has to pay for the tariff. This is now a cost to the UK company. It can either pass on the cost (rising prices) or absorb the increase cost (lower profits) or cut other costs (employee wages) to make the same profit. Now which do you think the UK retail shop will do, with tariffs typically around 40 to 50% on certain food groups, it certainly won't be cutting company profits.
And even if company profits were the only cut that would result in lowering corporation tax, meaning the UK Govt has to cut expenditure or possibly increase PAYE taxes.

I understand your point. If tariffs are 50% when there were none before then all they can do really is raise the prices to earn the same profit or sell more at a reduced price. Or like you said cut costs. i understand you know that anyway.

brickster69

SantaCruz wrote: »

It is indeed simple. The 'extra' money you were touting as coming from tariffs is coming from within the same country.

A ridiculously naive misunderstanding of basic economics, which you've continued to double down on.

It's fortunate you have no credibility to lose.

Sorry, i don't understand.

J Mysterio

Professor Moriarty wrote: »

Andy Palmer, the chief executive, acknowledged that things had not gone as expected. “We didn’t expect the downturn in the market, we didn’t expect the delay of Brexit … We are working to the plan and DBX is a key part of that plan.”

One thing I will say for Brexit (and Trump) is it has really opened my eyes to how stupid some people are. It's particularly astounding how many rich, successful people are just mind achingly stupid. I despair for the future.

Zubeneschamali

Folks, why get your knickers in a twist about it now? They didn't believe Project Fear, cool, whatever. It is done.

But they have decided. Bye now. Emphasis has to change from he said/she said to making the most of the situation.

They are down - kick them! Stamp on them! Play to win!

Peregrinus

J Mysterio wrote: »

One thing I will say for Brexit (and Trump) is it has really opened my eyes to how stupid some people are. It's particularly astounding how many rich, successful people are just mind achingly stupid. I despair for the future.

It's only astounding if you buy the line that we live in a world in which riches are predominantly the reward for talent, merit or ability. This is a convenient fiction that sustains a profoundly unjust social order.

Peregrinus

brickster69 wrote: »

Sorry, i don't understand.

The importer pays the tariff, but he passes the cost on.

Suppose a Spanish widget producer exports widgets to a UK buyer, charging €1 per widget. The UK importer applies a markup of 20%, and sells them to a retailer for €1.20. The retailer marks them up by 50% and sells them to the customer at €1.80.

Right. A tariff of €0.50 is now applied. The importer must pay €1.50 per widget. If he wants to maintain his margin of 20% he must sell to the retailer for €1.80, and the retailer must sell at €2.70. If it this happens, it will be the consumer who ultimately pays the import tariff (plus the cost of financing it).

The thing is, if the retail price goes up from €1.50 to €2.70, the consumer is likely to buy fewer widgets, in which case the importer and the retailer are maintining their margins of 20% and 50% respectively, but on a lower volume of sales. Which means they will import fewer widgets. So the burden of the tariff is spread around - the consumer pays more for widgets, but gets fewer widgets, the importer and the retailer sell fewer widgets and, of course, so does the Spanish producer.

They may all take steps to try and minimise the impact of this - the consumer might buy UK-produced widgets, which are pale and lumpy and prone to catch fire but only cost €2.00. This gives him more widgets than he would otherwise have, but of poorer quality. The importer and the retailer might reduce their margins to, say, 10% and 25% respectively, so as to get more sales or to be more competitive with the UK-produced widgets. The manufacturer might also reduce his margin, or he might try to market more strongly within the EU, where sales are not affected by the imposition of tariffs, or he might try to open up new export markets where the tariffs are less than €0.50.

Ultimately the cost could be spread in various ways. If the UK widgets are just as good as the Spanish one, but can be bought for €2.00, then
nobody in the UK market will pay more than €2.00 for a Spanish widget. Either the producer, the retailer and the importer all trim their margins so that the retail price of the Spanish widget is €2.00, or the Spanish export of widgets to the UK ceases entirely. Whereas if widgets cannot be produced in the UK (if "widgets" are pineapples, for example), then UK consumers just have to pay what an imported widget costs, or consume fewer or no widgets.