Leopards Ate My Face

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Tariff Isn't Tax on Other Countries?🤪 (lemmy.world)

submitted 1 day ago by TheBat@lemmy.world to c/leopardsatemyface@lemmy.world

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[–] calcopiritus@lemmy.world 3 points 20 hours ago* (last edited 20 hours ago)

The difference is that this way it's much easier to calculate prices.

If the tax were 20%, the exporter would have to do the inverse calculation. That is, "which price will result in me gaining $1000?" Which is not 1200, since 20% of 1200 is 240. x = 0.8y -> y = (1/0.8)*x -> y = 1.25x. so the exporter would have to price it at 1.25x the price, $1250. 20% of 1250 is 250.

So it's unintuitive that a 20% tax would result in a 25% price increase. That's my guess why tariffs are applied to the importer instead of exporter.