Six Months into Tariffs, Businesses Have No Idea How to Price Anything
Original: Six months into tariffs, businesses have no idea how to price anything
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As the Trump administration's tariffs continue to wreak havoc on businesses, companies are struggling to adjust their pricing strategies, with many admitting they have no idea how to navigate the uncertainty. Commenters weighed in on the issue, with some arguing that basic economic theory falls short in explaining the complexities of real-world pricing, citing assumptions that don't hold up in practice, such as perfect information and instantaneous price adjustments. A lively debate ensued, with some defending the value of simplifying assumptions in economic theory, while others pointed out that they can be woefully inadequate in the face of complex supply chains and fluctuating costs. The discussion highlights the ongoing relevance of economic theory in understanding the impact of policy decisions on businesses and consumers.
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Neither of which is true in the real world.
The assumptions are only bad if they prevent the simple models from being useful, and the existence of a scenario where a model's simplifying assumptions prevent it from being useful does not prove that the model is worthless.
It's like doing physics where you assume perfectly uniform spherical objects in a vacuum. It isn't worthless just because that isn't how the real world works, but depending on the circumstance it can also give you incorrect results, and sometimes even be way off.
This…is not true. What theory are you referring to?
Its a long time known flaw in economics. Im sure there are better models but i still agree with GP, the scientific field of economics is still a joke on par with psychology.
This is incorrect. Lack of information is priced in as "risk".
Insurance companies totally operate on evaluating and quantifying risk.
Classical economic theory predicts literally the opposite. It predicts the prices will go up exactly as if the base materials became more expensive. Classical economic theory predicts that free market produces lowest possible prices and thus any tarif means price up.
... Wait, why on earth would businesses do that? "Yeah, we're in the business of buying X for a dollar and selling it for 90 cents". What economic theory are you referring to that makes that in any way plausible?
When input prices go up, output prices go up, and usually consumption falls.
In real world markets economics considers elasticity, arbitrage, and distribution of market information between producers, wholesalers, retailers, buyers etc. But very little of that finds its way into op-eds or blogs aimed at a non-academic audience.
Also farmers can’t sell anything because retaliation has destroyed international demand (I’d say decimated but it’s way worse than reduction by a tenth)
If you threatened me with death if I didn't cut off my feet, I wouldn't consider that "reduction by 10%" even if mathematically it might be.
That said, I had sweet breads recently. And a cat being a deer sounds strange in English now, but deer is still the word for animal in other Germanic languages today, even if it faded in English, so it doesn’t sound completely archaic.
Not true. At least not yet.
Q2 agricultural exports were roughly flat to Q1 [1].
[1] https://fred.stlouisfed.org/series/B181RC1Q027SBEA
When it comes to soy, America has enormous leverage and China already accepted they're negotiating from a position of weakness.
You either have to find a way to consume what is already in the pipeline or go without. Governments are very sensitive to the food security implications because there isn’t much slack politically to “go without”.
The american public asked for it loud and clear for it last november. We should respect that.
36% of voters said: I support every outcome of the election, no matter what.
And we are now about half a year into his term and I see some complaining, but not one single person seriously opposing him and his politics. If the things he does were really that unpopular, he would not be able to do them. To me it seems like he has the full support of the american public.
The question is whether and how much these policies are supported, and the popular vote is obviously relevant in this regard.
> 36% of voters said: I support every outcome of the election, no matter what
That's not really true, for all you know those voters didn't support either outcome. You would expect a "loud and clear" victory not to leave one third of people unconvinced enough to avoid voting altogether.
> but not one single person seriously opposing him and his politics
Almost four hundred lawsuits have been filed against his administration, thousands of public protest events are happening, and the tariffs themselves were just ruled illegal. What does "serious" opposition look like to you? In any case, this is certainly not what "full support" looks like.
https://www.lawfaremedia.org/projects-series/trials-of-the-t...
https://time.com/7312601/anti-trump-administration-protests-...
https://www.bbc.com/news/articles/ckgj7jxkq58o
> If the things he does were really that unpopular, he would not be able to do them.
What is the logic behind this?
They are supported by the election. The american puplic accepted the result. Popular vote is not relevant for Trump.
> That's not really true, for all you know those voters didn't support either outcome. You would expect a "loud and clear" victory not to leave one third of people unconvinced enough to avoid voting altogether.
Maybe they had different reasons, but unfortunately thats not how not casting a vote works in a democracy. If you do not vote, you support the winner, no matter your intentions.
> Almost four hundred lawsuits have been filed against his administration
Trump has every branch of the government in his hand, law does not matter to him. Besides, he is a convicted criminal already. A few more lost lawsuits don't matter.
> Thousands of public protest events are happening
And millions of americans are not attending. Feels more like a vocal minority to me than a real movement.
> the tariffs themselves were just ruled illegal
I have not followed closely, but someday it gets to the supreme court and they will say "the president can do whatever he want", like they have said in the past.
> What does "serious" opposition look like to you?
Something that prevents Trump from executing his plans. Something that prevents Trump from just doing whatever he wants.
> time.com: "...thousands of protesters attended demonstrations on Independence Day..."
Thousands? Thats a fraction of a fraction of the american population. I am sorry, but I fail to see how that supports your point.
I will have to admit I am a little jaded when it comes to the US, but you must forgive me: when the US threatens your country with war, a lot of nuance goes out of the window. If an american clusterbomb kills me and my family tomorrow, I won't care that it has been ruled illegal by some lower court (Trump won't either).
If you want companies to invest in your country, the tariff has to make doing so make financial sense, and for the long term.
A lot of these tariffs are going on things that would require a whole factory to be built in the USA which doesn’t currently exist at all, and has no supporting infrastructure or workforce.
Companies can’t just decide right now, “oh shit there’s a tariff. Better but it in the USA right away!”
It’s great if you want to grant yourself the power to exempt those who please or pay you.
OP might not be wrong, but let's at least follow SOP for disclosing security failures (30 days pre-disclosure)
Odds are it hasn't been updated for 20+ years
> Retailers, including Lowe’s and Home Depot, buy Thompson Traders’ wares and set the retail price themselves. And they have been reluctant to pay Thompson Traders more.
It seems like this sort of scenario would benefit from some kind of risk protection, like insurance, or a futures market
This would be a claim by a large amount of insurance clients at once
Asteroid hits New York, insurance won’t pay out.
It’s the difference between getting cancer (calculable, but perhaps not high probability), and getting hit by a meteorite (not actually calculable, very severe consequence).
You’d insure against a specific product from a specific country being hit with a tariff. Tariffs are going up and down, sometimes in a way that may as well be random. (India not recommending Trump for a Nobel prize.) On its face, this doesn’t seem uninsurable.
Is there a market need great enough for price stability to offset the risk? It seems tariff whiplash will be an ongoing problem
https://www.wired.com/story/senators-probe-cantor-fitzgerald...
Yeah, complicated, costly and always changing regulations are great for doing business... /s
The underlying issue is complete chaos and confusion caused by this situation, not just any specific actual Tariff or not.
EDIT: You had years of corporate stimulus and ZIRP expanding M2, but the inflation floodgates only opened after a paltry return of a small fraction of the real wage losses the middle class and lower sustained over that period? Live by the macro grift, die by the macro grift. And I wrote-in Bernie both times.
Iwata took a paycut. The least our guys could do is take responsibility.
https://www.cnbc.com/2024/02/13/nintendo-ceo-once-halved-sal...
Higher cost of doing business from tariffs has frozen hiring. With a frozen job market, there’s less revenue coming in.
NYC is a leading indicator for the rest of the country.
[1] https://www.nytimes.com/2025/08/13/nyregion/nyc-jobs.html
That's true, but it didn't predate the election of a man who has made his understanding of tariffs and economics crystal clear in the months and years leading up to January 2025.
> Trump has made tariffs a central campaign pledge in order to protect US industry. He has proposed new 10-20% tariffs on most imported foreign goods, and much higher ones on those from China.
Only all the people who voted for them and all the people who voted against them?
See also: Harris is an elite! (Trump is more elite), Trump knows business (he's a pretty bad business man), Harris did nothing in office! (She was VP), Trump is the underdog! (He's literally already been president)
Trump was a terrible candidate and could've been beaten if a good candidate running against him.
* Groups like Project 2025 spent years preparing an assault on our legal system
* This time Trump populated his administration with sycophants from day 1, instead of starting out with establishment figures
* The GOP has spent the last 8 years reconfiguring themselves into supplication
This time, Trump is fully unhinged and unfettered, and he knows the legal peril he faces if the White House isn’t GOP-held for the rest of his life.
This combined with the utter self-emasculation of the Republican Party to Trump's incoherent, or at best self-serving, garbage is the most worrisome thing of all.
People who actually understand politics and who realize that the extent to which politicians keep their campaign pledges is usually related to how their parties end up performing in the legislature, rather than just being dishonest.
That uncertainty makes it very hard to manufacture goods or buy raw materials.
You now have a situation where one week the cost of a commodity is X and the following week it could be 2X. The butterfly effect across industries also cannot be predicted.
Many industries also seem to be still recovering from the pandemic period with supply of spare parts still being de-prioritised over making parts available for new units. :/
It is rather interesting to see the difference in standards of accountability for different presidents. Some are responsible for the economy even if its behavior is not sure to their actions. Others are not responsible for poor economic performance even when taking actions universally agreed to harm the economy.
https://en.wikipedia.org/wiki/Barack_Obama_tan_suit_controve...
Before tariffs, in the post-pandemic recovery, we also didn't see hiring go back to pre-pandemic levels. There are other forces like AI adoption.
I don't have good intuition around the connection between tariffs and jobs. Yes, higher inflation may require cooling down the economy. But right now it looks like rates will be going down and anyways rates haven't really slowed down the economy that much. Inflation did come down. Inflation can have some benefits too for employers, it erodes the employee's salaries (and potentially other costs). If companies can raise prices and not pass that on to employees or to their suppliers (as they've seemingly done during this last inflation cycle) then it can be a win for them. A weaker dollar can also help US companies compete globally.
If companies are doing well and growing, and they seem to be, why aren't they hiring more? The largest US tech companies are sitting on piles of cash and making huge profits, for some time now. Is it just that they've become more productive and need less people? Maybe they don't have anywhere to put more people towards? Maybe they're hiring outside the US (this one is not a maybe- they are). Is the uncertainty related to progress in AI? to other macro factors?
How do you bid on a big project if you don't know what materials will cost next month, or 6 months, or a year from now? It's fucking impossible. And with inflation, labor cost is spiking. It's hard for people to get buy, so they're asking for more. It has investors and banks spooked to loan money for projects, because they could easily fail with so much volatility.
Nobody mentioned yet the drop of the dollar making every single import 10% more expensive since the start of the year. That is on top of every tariff and is inflationary.
Government spending went up by a surprising amount while tariff revenue rolls in. I suspect one reason there is no detailed budget is to create the space to move things around without much notice. If a large swath of the tariffs would be ruled illegal (already happened twice, one step to final) the situation could become interesting.
I imagine to make American exports cheaper.
It will take years to make America an exporting nation. In the meantime many many businesses will go bankrupt. This administration doesn't care as they just see it as a cost of fulfilling their longer term plan to make America an exporting nation.
For example in France their own Le-Trump aka Marine Le Pen had 41% votes last election cycle, so nothing really happened and system centrists won again, politics remained moderate and predictable. But if she or her ideological successor even takes 50%... hooboy, EU will see some Orbanification just like USA does today.
I don’t believe most if not all of us have experienced such an immature and erratic administration. We are taxing trade partners, flip flopping on rules and nobody knows what to make of it.
https://www.cnbc.com/2025/04/22/trump-tariffs-replace-income...
Imagine trying to get a loan from a bank to make a USA manufacturing plant, pointing to the 150% Chinese tariff. A week later the tariff is 25%. Does your math still work? Probably not. Will that bank continue the loan? Nope. Will the bank even entertain a similar proposal from someone else right now? Nope.
If you want to grow USA manufacturing you need to subsidize it, or give private industry confidence it's not going to lose them money. If you can't do that, your relying on charity / non-profit / philanthropy... And I don't see many of those in manufacturing.
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