Brooklyn electronics company Adafruit hit with surprise $36K tariff bill: "pay in one week" : economics

[–] radiohead37@lemmynsfw.com 87 points 3 weeks ago (3 children)

Great job. Tariffs killing American companies.

[–] Rambomst@lemmy.world 24 points 3 weeks ago (1 children)

Working as intended....

[+] sj_zero@lotide.fbxl.net -11 points 3 weeks ago (2 children)

I know you're just being snarky, but if a company's main purpose is importing parts from China then they suffer as a result of tariffs on China, than it is in fact working as intended.

Millions of Americans in the entire swaths of the country had to watch their homes die as businesses were outsourced. What's left is crime, drugs, and suicide. Like a lot of things, the people on the ground were just told to suck it up and deal with the new normal.

Besides, with China increasingly saber rattling, what happens if they try to take Taiwan, or end up in full scale conflict with India? COVID was a taste of a future that could be upcoming.

It is true that tariffs are paid for by American companies and by American consumers, but it is also true that if it is American companies and American consumers who end up buying the stuff from China and justifying the movement of industries from developed countries to countries like China. People don't talk a whole lot about it, but there were a number of policy changes that were made around the 1970s which were instrumental in hollowing out the rust belt over the past 50 years.

Countries particularly like China can impose their own tariffs, but the reality is that prior to the economic changes in the world wars that made globalization and free trade a good idea, America was its own biggest market. Henry Ford famously increased the pay of his workers and one of the benefits of that was that they could afford the cars that they were building.

Another thing is that tariffs alone don't rebuild industry, but unlike the previous changes they don't hurt. If they're going to stick around in the long term which unfortunately remains to be seen since American democracy happens in four your increments, then companies that were going to invest in China suddenly have a large incentive to invest in America for American markets.

It is true that reducing us trade can affect soft power, but I think that there's a counterpoint that letting things continue as they are will also reduce soft power because racking up debt to buy Chinese goods isn't sustainable in the long term or even the medium term. Moreover, if the United States can't manufacture anything to defend itself, and that conflict with China happens, it look a lot like Europe and it's struggle against Russia.

It could also be the case that this isn't being rolled out in a very nuanced and structured way, and I think that there is legitimacy to that, but as I mentioned before United States politics happens in 4-year increments, and so you have to go hard early.

Oh, sorry, it's Lemmy. "Look at how stupid and bad Cheetos Hitler is!"

[–] shalafi@lemmy.world 6 points 3 weeks ago (1 children)

Here's the rub, and you said it: The tariffs may not last and our politics come in 4-year intervals. Who in their right mind is going to build factories here given the outrageous risk?

Also, not sure what you're on about with America not being able to defend itself? Chinese rare earth export bans?

[–] sj_zero@lotide.fbxl.net 2 points 2 weeks ago (1 children)

Most people didn't see it during covid, but even a lot of stuff that was "made in America" basically became unobtainable for a long time afterwards, particularly on the industrial front. If the precursors of most things they do make come from China, then it doesn't matter what America or the west in general makes because for example it becomes difficult to get electronics components like resistors, but also they've basically become the place to go to get molds for plastic manufacturing.

The trade war is just a taste of what that would be like, and adafruit is just one of the casualties.

The fact that it's going to be hard to make a change I think doesn't justify doing nothing. You have to at least try, because maybe you fail but maybe the next administration besides that that wasn't such a bad idea after all and keeps some of those policies in place, the same way that the Biden administration had kept tariffs against China in place.

It's a two-way street here, yes to an extent there is additional risk from building factories in a country where tariffs are rising, but on the other hand if you are not building your things in America then there's a chance that you end up getting priced out of the market. I've already written more than most people on the tariffs, but protectionist tariff policy goes all the way back to Alexander Hamilton in the 1700s.

[–] shalafi@lemmy.world 1 points 2 weeks ago (1 children)

Grateful you've written all this, and I read every word and upvoted every post.

If you're not American, you sure know our history!

Maybe I missed it, but again, give out fluctuating politics, why would anyone build factories here? If we had a hard line on tariffs, were willing to eat the short term pain, and stuck with it, I can see results. Looking at it from a capitalist's point of view, all I see is wild risk, better to hold my cards for now.

[–] sj_zero@lotide.fbxl.net 1 points 2 weeks ago

Honestly, I gotta take my licks at the moment, since it looks like the US is relenting particularly with China.

So yeah, it's a couple months of pain for a slightly better(?) tariff deal, but that's not transformative. It isn't going to work like the 1800s to actually build a whole infrastructure.

If things were done like back then, it would hurt in the short and long term but the US would come out stronger for it. Instead it was just some volatility and some mild trade concessions.

[–] markovs_gun@lemmy.world 5 points 3 weeks ago (1 children)

This displays a really poor understanding of how modern manufacturing works. It is simply not possible to build everything in America even if you want to. The factories just don't exist to build PCBs from scratch here. If the factories existed and the issue was simply cost, then yeah maybe a tariff might work, but for most products that's not where we're at, and it takes years to build factories. In that time you're essentially throwing a bomb into the entire economy to try to force people to make those factories without using parts made elsewhere, and to make matters worse, you're making everyone do it all at the same time. It's pure stupidity plain and simple.

I work at a large US chemical company that is facing a lot of turmoil from these tariffs. You know what we're doing right now? Moving manufacturing out of the US to avoid retaliatory tariffs from other countries. That's right- we're taking a look at all of our manufacturing processes and seeing what we can quickly move overseas and out of the United States because there just isn't any other way to survive the tariffs. Trump's tariffs are not merely killing American jobs when it comes to companies that import goods from China, it's killing them on the export side as well because everyone else is understandably retaliating against us. The idea that Trump's tariffs have any possible way to help anyone is pure delusion.

This sort of thing is the reason Congress is supposed to be the branch that handles taxes. There are a lot of factors to consider and different constituents are impacted differently. The president isn't supposed to be able to levvy taxes in the first place because one person can just be an idiot who doesn't understand modern economies and decide to wreck the economy with taxes.

[–] sj_zero@lotide.fbxl.net 1 points 2 weeks ago (1 children)

One thing that you are absolutely mistaken about is that I don't understand how manufacturing works. I'm a pretty old guy, and I've spent my entire career in manufacturing and heavy industry. That's exactly why I think it's important to be trying to rebuild local supply chains.

During covid, and for quite a few years after, parts that claimed to be made in America couldn't be purchased without massive lead times because it turns out that they were heavily reliant on Chinese supply chains. It doesn't matter that you have a factory that can build a vfd for example if you can't get resistors. That matters a lot.

Now you can say that the factories don't exist, and that is absolutely true. The problem is that you need to stop thinking in terms of first order effects and start thinking about knock-on effects. This is been our problem for the past 50 years. We don't have the factories because they shut down because industrial policy was to globalize. And we thought we could get away with that, because for example we could sell our expertise to other countries. The problem is that all the people who had expertise are dying of old age. Their kids are growing up in a world where they never had to go to a factory, they don't know how to build a factory, they don't know how to build anything. This is a big problem, and it's always been a big problem. In the 1700s, Alexander Hamilton presented a report that suggested that tariffs would be useful in helping to produce big enough trade barriers to build the industry on this new continent of america, and there was a lot of trouble caused by such tariffs. At the time the global manufacturing hub was not China but england. England was able to produce materials cheaper and better then the Americans could. The tariffs were effectively keeping out higher quality, lower cost goods. Regardless, this was how the United States ended up with its industrial base that was hollowed out centuries later.

I'm not pretending that tariffs aren't going to cause pain. They caused tremendous pain back in the 1700s and 1800s, and in fact we're likely part of the kindling that helped spark the civil War. Extremely high tariffs with England resulted in England putting retaliatory tariffs on American cotton and other agricultural exports, and so the South tended to suffer while the north benefited. Eventually things came to a head and they ended up needing to come to a compromise of higher tariffs then you might expect, but much lower than what the north was originally implementing. All that being said however, this is long-term thinking. It's what long-term thinking looks like. It's not looking around and saying that factories don't exist today, it's asking how we can make sure that there are factories tomorrow. It isn't talking about how we are relatively peaceful with China today, it's about asking what could happen if we ended up in a war with China tomorrow. This sort of long-term thinking is actually what the West in general needs.

And I think it's important to note, I'm not saying this from the perspective of an American who's going to benefit from these tariffs. I'm saying it from the perspective of a citizen of a country who has been hit hard by US tariffs. It would be better for me if everything was tariffed at zero percent. On the other hand, just because something hurts me doesn't mean I don't understand why it's important.

[–] markovs_gun@lemmy.world 1 points 2 weeks ago (1 children)

I think you're getting hung up on the idea that since the stated goal of the tariffs is to bring back American manufacturing, people who are against them must be against bringing back American manufacturing. That is not the case. Most people are pretty on board with that idea on its own. The issue is that tariffs don't really do that and they sure as hell don't do that given how they've been implemented. Here's a case study - my company currently makes a product in the US and buys one of the feed materials from China. Due to tariffs, we have started buying the feed materials from Indonesia instead, and due to the retaliatory tariffs from China, we have started making the product in India instead of the US. So as a direct result of the tariffs, we have moved manufacturing outside of the US and haven't bought any additional US products. The tariffs have reduced American manufacturing in this case in a very real way with no additional benefit whatsoever.

The Trump tariffs are especially stupid as economic policy. Being against them has nothing to do with being against bringing back manufacturing or even with being against trade protectionism. Imagine if you went to a dentist for a toothache and he brings out a hammer and says okay well we're going to take out all your teeth. That's a bad dentist right? A good dentist will suggest action targeted at the bad tooth to try to fix what's wrong with it instead of just destroying everything because there's a problem. Trump is doing the economic equivalent of the bad dentist.

[–] sj_zero@lotide.fbxl.net 1 points 2 weeks ago

I tend to think that even if Trump came up with the best policy on planet earth, nobody on lemmy would admit it, they'd just keep calling him stupid. It seems like things are pretty tribal and so even if something does have some thought behind it, it's required to just keep on the attack so everything is evil and stupid. You can say "no, we'd be honest", but just look at the economics community here -- virtually every post is about how stupid Trump is.

There weren't just tariffs against China, they were just particularly bad to that country because they are a major US strategic rival. Something being created in China being moved to India may not necessarily be the optimal outcome (or even something being "made in the USA" being made in India being the optimal outcome), but as I said in my long post about tariffs, there are multiple things going on with different time constants for each. Immediate consequences are going to look bad because none of the potentially good things can happen on short timespans -- as everyone else has pointed out (and as I pointed out in my post on tariffs), building a factory or moving supply to the US takes a really long time, whereas the immediate negative consequences of tariffs occur almost immediately. That doesn't mean eating short-term pain for long-term benefits is stupid, it just means the pain comes first.

Will Trump's tariffs work -- that's what would make them smart or stupid -- so what's the answer? I don't really know. Widespread tariffs like the tariffs of abomination did work to increase the US manufacturing output in the 1800s despite introducing massive amounts of pain including being a (though certainly not the primary) likely causal element of the civil war. However, we aren't living in the same world as America was in the 1800s. England was more or less self-sufficient back in the 1700s and 1800s, the world is more globalized today, so it might not be so simple to do the same thing again.

Is dramatic action required immediately? Yes. Full-stop.

The US national debt is at 36.8 Trillion dollars at the moment according to US national debt clock. The interest on the national debt is already larger than the US defense budget. The idea that globalization can exist as it does in 20 years without the Americans being able to defend maritime shipping lanes with their absurd army is nearly 0. Moreover, as I mentioned, if war with China occurs and it really looks like there's a chance they try in the next little while, then all the Chinese supply chains immediately shut down.

So the only option is to start taking major actions. Just look at the news feed, it's all filled with how we should have just kept with the status quo, but that's not wise at all. So are the tariffs a dumb idea? In the short term, definitely. Do nothing and you won't hurt anything. But if you've been living in the rust belt you know full well what we've already lost -- the post-war policies have decimated the entire region. And I'm not saying the rust belt can return, but if nobody does anything painful to try to get something somewhere to return, the post-globalization era will be much more painful than it has to be.

One of the biggest moments of globalization failing in history was the Bronze Age Collapse, and it destroyed every ancient civilization in the fertile crescent except Egypt. In the near future of that event entirely new civilizations lived in those regions and some, such as Crete, would be lost to history entirely until a mere 100 years ago due to some exceptional archeological work. That collapse in part caused global supply chains feeding the bronze age to end, and that was a less integrated economy than today.

It isn't just peacetime vs. wartime. It's about good times vs. hard times. The current economic consensus was built in the post-war period where the US was the only country whose manufacturing capacity hadn't been blown to smithereens over two world wars. It made sense at that time because it was a move without a downside -- utilize multilateral free trade and everyone had to buy from you anyway, and if you needed anything from your clients you could get them at low prices without any tariffs. The problem is it isn't 75 years ago anymore -- Europe has a manufacturing base of some design again (with Germany at its heart, ironically), Asia is a manufacturing superpower and not just China, and the US is still following a foreign economic policy that was designed when nobody else was making anything. The US was also funding protecting the planet's shipping lanes to make globalization practical and that worked because it was doing everything for the planet earth, but now it has as high a debt/gdp ratio as it did after the second world war, but it isn't the end of the second world war any longer.

My country is generally fairly left, and we have some massive tariffs against the United States, including over 100% on dairy products, and 45% tariffs on aluminium and steel. All of those tariffs predate Trump's political career. It seems like high protectionist tariffs only are complained against in one direction.

Here's my previous analysis of the tariffs: https://lemmy.world/post/28221500

[–] breezeblock@lemm.ee 21 points 3 weeks ago

Correction — small American businesses. The large ones can easily pass on the cost to consumers.

[–] Manifish_Destiny@lemmy.world 5 points 3 weeks ago

It was meant to conglomerate them. One less Amazon competitor to them.

[–] towerful@programming.dev 74 points 3 weeks ago (2 children)

Adafruit makes some seriously useful PCBs.
If you have ever tinkered, you likely have some sort of requirement that needs a little more tech to make work. Afafruit cover that gap, and all their stuff is open source.
A genuinely good US tech company.

[–] randomblock1@lemmy.world 27 points 3 weeks ago

Not only that, but they make a LOT of libraries that make using those sensors WAY easier. Arduino, CircuitPython, and more. And lots of well-written tutorials! They care, and it shows. They don't deserve these tariffs...

[–] MotoAsh@lemmy.world 3 points 3 weeks ago (1 children)

Isn't Adafruit British in origin?

[–] ooterness@lemmy.world 7 points 3 weeks ago (1 children)

No, it's based in New York.

[–] MotoAsh@lemmy.world 5 points 3 weeks ago

OH! I'm thinking of the Raspberry Pi Foundation, which is in Britain.

I guess I confused them in my head since I got in to both around the same time so many years ago and seldom think about origins of corps...

[–] henfredemars@infosec.pub 21 points 3 weeks ago* (last edited 3 weeks ago)

We don’t like intellectuals nor investing in the future around these parts.

Money now only.

Also, somebody ate my marshmallow I can’t find it.

[–] death@infosec.pub 16 points 3 weeks ago

Needless to say, most companies aren't Apple. They don't have cash reserves, can't reroute shipping, can't lawyer/bribe up, can't afford to lose money for even a month. We're going to see the first bankruptcies and/or layoffs soon. Shit.

[–] Tronn4@lemmy.world 11 points 3 weeks ago

Use trumps tactic and dont pay it

[–] dirtycrow@programming.dev 7 points 3 weeks ago

It’s pretty funny to sell something and then pay more than what the sale was worth to import it. I can see a lot of US businesses getting hurt this way from the volatile auction-based tariff prices (out my ass) by losing customers or having to eat the loss.

[–] ArmoredThirteen@lemmy.zip 7 points 3 weeks ago (1 children)

I was just about to buy most the stuff I need for a cyber deck from them

[–] anomnom@sh.itjust.works 3 points 3 weeks ago

Do it, they need every drop business they can get.

I’m ordering a round display and driver I was planning on testing out later. Was gonna wait but now I want to do it now to hopefully help them survive this.

[–] GooberEar@lemmy.wtf 2 points 3 weeks ago

I often hear good things about AdaFruit, so it made my terrible experience with them all the more disappointing and unexpected.

I won't launch into the full story, but I had placed what was to me an expensive order. One item of the cheapest things I bought was missing a part. Their customer service folks were so dismissive and unpleasant, they made me try to resolve the issue with their supplier (iirc piminori or something along those lines), they insisted that there was no way this could happen because it would never have passed their quality control team, that it wasn't their responsibility to make it right, etc. It was such a bad experience that I've never returned.

So honestly, I have no sympathy here. From my perspective, this sort of thing could not have happened to a more deserving company.

Economics