10% duties on all Chinese goods on 2/1

[GroovyGeek]

The politics of the situation aside, anyone think that a 10% price hike on new drones is coming?

 

[msinger]

I guess that would be par for the course after the inflation we've been enduring for the past several years. However, whatever you've been reading might simply be a negotiating tactic. I'm not convinced that significantly increasing the cost of goods from any one country would benefit the US as a whole.

 

[Bad Santa]

Economics 101, sadly.

Manufacturers run on percentages.
Let's say a manufacturer expects a 25% return on their product.
Let's say their product cost $75 to make. So they mark it up 33% to get to the 25% return.
Now let's say their product cost $75 to make. You'd think that setting the price to $100 is going to get them to their 25%. And, well, it does BUT, that's still a 33% mark up.

NOW, the "tariff" is 10%. So the manufacturer now has to sell their product for $110, right? Not so fast.
The "cost" to make their product is now $85. So, now they need to mark THAT up by 33% to get their 25% return. That's $28, not $25. So they should only mark it up $3, right?
Not so fast!!!
They still need to get their 25%. And if the cost of the product is $85, marking it up $3 only nets them $18. So, of course they need to mark it up more than $18. So they add that $28 to the $85 and now that product doesn't cost $110, it costs $113

A 10% tariff isn't a 10% increase in cost to the consumer.

In this case it just looks like 13% increase but there's other ways of doing the math to get it even higher.

Do you think manufacturers eat increases in cost? NO. They always find a way to justify making more profit off of these things.

 

[mavic3usa]

I am also hearing the 10% number being thrown around. As mentioned, sounds like the beginning of "negotiations." Either way, I made my next and last DJI.com order just in case. Pretty much I have everything I need from them for the next year (not including any new launches).

Governments getting involved will never turn out well for the consumer and the free market in the long run. Oh well, I just we'll just have to re-learn that the hard way.

 

[Meta4]

Do you think manufacturers eat increases in cost? NO.

What are you talking about?
The manufacturer only deals with tariffs if the manufacturer is also the importer

They always find a way to justify making more profit off of these things.

Importers will always pass on their increased costs, but that's not making them any more profit.

 

[GroovyGeek]

Last time around a tarrif on bicycles showed up almost immediately in bike costs.

 

[msinger]

Last time around a tarrif on bicycles showed up almost immediately in bike costs.

Like @Bad Santa mentioned above, this could be a case of manufacturers taking advantage of the situation. However, tariffs or not, there will always be companies looking for ways to exploit consumers.

 

[GroovyGeek]

Like @Bad Santa mentioned above, this could be a case of manufacturers taking advantage of the situation. However, tariffs or not, there will always be companies looking for ways to exploit consumers.

Don't think there is much exploitation going on. It's just about maintaining profit margins.

With that said, tareifs are imposed on declared value, not retail price. So the system can be gamed by manipulating declared values.

 

[msinger]

Don't think there is much exploitation going on. It's just about maintaining profit margins.

Unfortunately, business in the US often goes beyond simply maintaining profit margins. It tends to focus on maximizing profits, sometimes at the expense of customers.

 

[Cafguy]

I don't like it but then again I buy a lot of electronics and other stuff from China. OR maybe it will help we'll see.
I think it will definitely translate into a cost increase to their consumer line of Drones but DJI wont get the extra money. Since I don't see them simply adding 10% to the cost of each individual product. I think perhaps the most popular "consumer" Drones will get a 13 to 15 percent hit to help pad the almost 1000 Dollar or more increase in Enterprise, Matrice, and Ronin Product Prices coming up.