I think it actually can’t work that way at all if he does that. Theoretically, it’ll work upto 100% tarrifs but it’s way worse.
Imagine mr T says 100% tarrifs on product X, that costs $20.
If consumers pay it then it just costs $40 and it’s over. If the original country pays it then they have to pay $20 to sell $20 product, which is not profitable at all. But if they jack the price to $40, then they have to pay $40, again not profitable. So this system only works for smaller % tarrifs so that they can raise the price to cover that.
Suppose you have $2 profit (10%) on $20 item, and 20% ($4) tariffs. You can’t pay more than your profit, so you increase the price from 20 to 26, now you have 30% ($8) profit, you pay 20% ($5) tarrifs and get total 10% profit. So you see with 20% tariff you get 30% increase in cost. So this would work worse than consumers directly paying 20% tariffs.
I think it actually can’t work that way at all if he does that. Theoretically, it’ll work upto 100% tarrifs but it’s way worse.
Imagine mr T says 100% tarrifs on product X, that costs $20.
If consumers pay it then it just costs $40 and it’s over. If the original country pays it then they have to pay $20 to sell $20 product, which is not profitable at all. But if they jack the price to $40, then they have to pay $40, again not profitable. So this system only works for smaller % tarrifs so that they can raise the price to cover that.
Suppose you have $2 profit (10%) on $20 item, and 20% ($4) tariffs. You can’t pay more than your profit, so you increase the price from 20 to 26, now you have 30% ($8) profit, you pay 20% ($5) tarrifs and get total 10% profit. So you see with 20% tariff you get 30% increase in cost. So this would work worse than consumers directly paying 20% tariffs.