Will tariffs cause MIM Fenders, Squiers and other imports to become more expensive. 25% or more

[Nev375]

Prices will very likely go up. By how much, who knows?

Economics is complicated and even the experts disagree.

 

[Fuzzbass]

I think tariffs are a certain someone’s favorite empty threat

And I think those being threatened realize this.

 

[DJ Bebop]

It sure will and my guess is USA made will be more affordable.

Not necessarily. It has been noted that some manufacturing costs and supply items have dropped in price on some things yet those savings did not get passed on to the consumer. This includes USA-made items by USA-made corporations.

I hope you are right though

 

[gustobassman]

Since there’s supposed to be significant price drops in other areas these tariffs might be painless??
Time will tell.

Tell me you've never taken an economics class without telling me you've never taken an economics class.

 

[Gaolee]

If … the big IF … manufacturer passes only the tariff onto consumer then a 25% import tariff may end up pushing prices up by no more than 10-15% on retail price.

It depends on the profit margin the manufacturer realizes on the product, whatever it is. If it's a thin profit margin, then the price will get passed along without any mitigation. If it's a thicker profit margin, the price will go up, maybe not as much at first, but it will go up. It will eventually go up the full amount if it does not right away. Building capacity to bring manufacturing costs plenty and takes time, so that's not going to happen right away, if ever. Things like silicon chips are made in plants that cost a billion or more to build and take a very long time to get up and running. There are chip fab plants under construction in the US now, but it's going to be a while before they are fully operational. I don't know what kinds of chips they make.

 

[Gaolee]

Fender Schmender. I was getting ready to build a house

Well, better get 'er done in the next month or two. Ready, begin!

 

[dalkowski]

Since there’s supposed to be significant price drops in other areas these tariffs might be painless??
Time will tell.

Nope, never.

 

[tIANcI]

It sure will and my guess is USA made will be more affordable.

Relatively 'cheaper' because the price of not made in USA will go up but made in USA won't be retailing at a lower price that it has been. Look at the difference in price between a Tribute G&L vs a Fullerton G&L. The gap is huge. Quality difference is not that huge, of course choice of woods in Fullerton series is better BUT sound quality is not that far off at all.

 

[gln1955]

If … the big IF … manufacturer passes only the tariff onto consumer then a 25% import tariff may end up pushing prices up by no more than 10-15% on retail price.

There is no if, big or small.

 

[Gaolee]

The idea of the tariffs is to make "foreign" products less economical than your "home-grown" products. If the price of a MIM goes higher than a MIA you'll buy the MIA and keep your $$ in the USA.

Hopefully it will reduce prices for Asian (Indo, Japan, China) instruments in non-US markets when the manufacturers need to increase sales into more free market economies. US companies building and selling products without them ever touching US soil will probably avoid any import tariffs.

There may also be an accompanying devalue of the $US, making it even cheaper for overseas buyers to spend money in the US. Importing a $300 Squier from the US works out cheaper for me in Australia than paying $600 retail.

Funny thing is that the MIM and MIA Fenders are built a fairly short distance apart, and by a very similar workforce. In my less than sensitive hands, a MIM and MIA are nearly identical. Some of the electronics and other parts are a little higher quality on a MIA, but other than that, I really can't tell. I have a P, and it's MIM. Is a MIA worth more? Not to me. If the prices were the same, I may have gone for a MIA, but then it would come down to the specific instrument.

I doubt that the dollar will devalue much unless something really unfortunate happens. This is a complex thing.

 

[Gaolee]

That’s the point of tariffs - it’s a tax imposed on imported goods, which the manufacturer/seller will pass onto the customer. The goal is to drive purchases of locally sourced products, but given the international supply chain necessary to manufacture instruments (ex: rosewood) it’s inevitable that some of those costs will be passed onto consumers.

The most damning example of how bad tariffs are for consumers is the tariffs passed during the Great Depression. In an attempt to spur job growth, huge tariffs were put on all imports. This led to 1. Manufacturing costs rising, since raw materials were imported and 2. Reactionary tariffs from other nations. This led to even further manufacturing reductions and worse job loss.

And finally it led to WWII. The trade wars actually led, in part, to the Great Depression. That and a bunch of other factors I have pretty strong opinions about but won't get into here.

 

[Gaolee]

Prices will rise in the US if the tariffs are implemented. It is intriguing that the purported aim of the tariffs is not to achieve a change in trade dynamics per se, but to incentivise the target countries to clamp down harder on alleged illicit activities. This suggests that there is a chance that the tariffs are never implemented or are rescinded if the target countries successfully negotiate with the incoming administration.

An example of the use of this sort of trade leverage to achieve other aims was the tariff wall erected by China against certain Australian primary products (including barley, lobster, and wine) in response to perceived negative rhetoric by the Australian government. Upon a change of administration and a softening of rhetoric by the Australian government, the tariff wall was gradually dismantled and Chinese consumers had access to these products at realistic prices again. The tariffs imposed were of the order of 100% to 200%, so they effectively prohibited trade.

Another thing to consider is the retaliatory actions by those the tariffs are aimed at. US soybean exports were decimated and have been supplanted now by Brazilian soybean exports. US farmers were harmed then, and they haven't gotten their markets back.

 

[bigboy_78]

An example of the use of this sort of trade leverage to achieve other aims was the tariff wall erected by China against certain Australian primary products (including barley, lobster, and wine) in response to perceived negative rhetoric by the Australian government. Upon a change of administration and a softening of rhetoric by the Australian government, the tariff wall was gradually dismantled and Chinese consumers had access to these products at realistic prices again. The tariffs imposed were of the order of 100% to 200%, so they effectively prohibited trade.

The tariffs didn't only deny the Chinese consumer access, they put a massive hole in the Australian export market as well.

I don't see how destroying the export market of you closest neighbour in Mexico is going to help ease the traffic of black-market goods and people across a land border. The cartels can start importing duty-free fresh fruits and vegetables as well.

 

[Jeff Scott]

It has been reported already that some manufacturers, not necessarily instrument makers, said they will pass on whatever increase they are hit with to the consumer

No surprises there.

 

[Gaolee]

The tariffs didn't only deny the Chinese consumer access, they put a massive hole in the Australian export market as well.

I don't see how destroying the export market of you closest neighbour in Mexico is going to help ease the traffic of black-market goods and people across a land border. The cartels can start importing duty-free fresh fruits and vegetables as well.

Exactly. It's not going to do the things that have been claimed.

 

[Jeff Scott]

People will have to sell their gear to feed their adult children...

I knew there was a reason I didn't want (nor do I have) kids (that I know of).

 

[DJ Bebop]

Very rarely do prices that go up, come down. Regardless of the reason of the price hike.

 

[gln1955]

Exactly. It's not going to do the things that have been claimed.

Considering how intertwined we are in every part of the global economy, there is zero chance anything good will come of this.

 

[Smooth_bass88]

not a very promising economic outlook unfortunately.

 

[hrodbert696]

Considering how intertwined we are in every part of the global economy, there is zero chance anything good will come of this.

And that was the point. At the Bretton Woods conference in the closing days of WWII, the allies decided on a postwar strategy of deliberately integrating international economies, and created the World Bank and IMF to promote that goal. The idea was that if everyone's economies were interdependent, no one could afford to go to war on a major scale (not between "great powers," anyway). There have been plenty of wars since then but nothing like the world wars or the Napoleonic wars, so maybe it's working. But it has its drawbacks, winners and losers both. It's not coincidental that the Allies were mostly industrialized capitalist countries.

The comment about making US products more affordable has been jumped on enough, but I would add that the only potentially good use of a tariff is to protect a domestic industry from cheaper foreign competition until it's developed enough to compete without the tariff. It doesn't make the domestic product cheaper, it just makes foreign products more expensive so you might as well buy the domestic one. But in musical instruments, generally US- and foreign-made instruments are all made by the same company. Fender's business model is cheap Asian-made Squiers, mid-range MIM Fenders, and high-end MIA Fenders. They aren't in competition with each other, they're aimed at different market segments.