How much do you think it costs to make a pair of Nike shoes in Asia?

Trying to summarize the summary for myself

From a $100 shoe that sells for $76:

- $24 goes overseas (22 cost, 2 freight)

- $8 goes to the US gov't (3 import, 2 Nike tax, 3 Footlocker tax)

- $33 goes to US employees or businesses (5 Nike marketing, 11 Nike expenses, 17 Footlocker expenses)

- $5 goes to Nike (11% return)

- $6 goes to Footlocker (8% return)

But now with 100% tariffs, it's a $100 shoe that sells for $100 (or a $132 shoe that sells for $100) and:

- $24 goes overseas (22 cost, 2 freight)

- $29 goes to the US gov't (22 import, 3 Nike tax, 4 Footlocker tax)

- $33 goes to US employees or businesses (5 Nike marketing, 11 Nike expenses, 17 Footlocker expenses)

- $7 goes to Nike (11% return, 7.15 exactly)

- $7 goes to Footlocker (8% return, 7.45 exactly)

And if a US shoemaker wanted to undercut the import, a Made in USA shoe that sells for $100:

- $7+ goes to the US gov't (? shoemaker tax, 3 Nike tax, 4 Footlocker tax)

- $79 goes to US employees or businesses (46 to shoemaker, 5 Nike marketing, 11 Nike expenses, 17 Footlocker expenses)

- $7 goes to Nike (11% return, 7.15 exactly)

- $7 goes to Footlocker (8% return, 7.45 exactly)

The piece to add there is that all this money is getting paid by the consumer. The overseas piece doesn't change, same number of US dollars going to the other country. The $24 increase in cost is paid by the US consumer.

It's just a sales tax. I don't know why people opposing tariffs never talk about them in this manner because sales taxes are something people innately understand if they have spent any time in the US and "tariffs" clearly aren't as well understood.

Yes that's right. The manufacturing cost in the US would have to be $46 or less to undercut the import. So ignoring tax changes, something like...

A Made in USA shoe that sells for $100:

- $7+ goes to the US gov't (? shoemaker tax, 3 Nike tax, 4 Footlocker tax)

- $79 goes to US employees or businesses (46 to shoemaker, 5 Nike marketing, 11 Nike expenses, 17 Footlocker expenses)

- $7 goes to Nike (11% return, 7.15 exactly)

- $7 goes to Footlocker (8% return, 7.45 exactly)

It's worse than a sales tax. Tariffs have a few market-distorting effects that a sales tax doesn't.

* Domestic consumers and companies are incentivized to potentially go for the 2nd best product. This over time can impact productivity as the tooling will decline over time as inferior solutions are bought.

* Reduced competition. We've seen this with the 25% "chicken tax" on pickup trucks. Arguably one culprit in US automakers falling behind is that they had a protected market around pickup trucks where it was hard to impossible for foreign competition to keep them on their toes. So US automakers retreated more and more into this safe haven.

* Destruction of economies of scale: If everyone wants the entire supply chain to be replicated in their country, we obviously loose economies of scale and thus efficiency. This sounds like it would be small but having multiple Shenzhen's is just not viable and we'll have to deal with higher prices and less product choice.

* Galapagos island syndrome: Over time separation of markets can lead to incompatible technologies which amplifies all other points.

That's what I don't get. It's always phrased as the US somehow making all this money when in reality it's Americans that are paying for it. Among other reasons to be able to afford tax cuts in the future. Sure this will hurt other economies but primarily right now it seems to hurt the American economy and people the most.

Just to say the obvious, they are also going to sell fewer/cheaper shoes according to the demand elasticity since the consumer price is 32% higher. Despite Nike making slightly more on a per-shoe basis, they are probably going to make less overall.

Is there a reason, be-it special buildings, tools, skills that shoes can not be made in the US to avoid the tariffs?

If Nike shoes exceed the cost of domestically produced shoes, isn’t that… like… kind of the point?

> sales taxes are something people innately understand if they have spent any time in the US

The way they are done in the US is maddening. You go to the counter and find the price is higher than the tag price by some random amount. It seems to vary wherever you go and depend on what you buy.

A tariff might actually be better.

> Tariffs have a few market-distorting effects that a sales tax doesn't.

There are still stupid edge cases. The cake-versus-biscuit saga in the UK comes to mind.

https://en.m.wikipedia.org/wiki/Jaffa_Cakes

I wouldn't assume that they wouldn't segment products. Nike already offers more expensive lines with higher margins to offset less profitable ones. Why should we expect them to pass on direct costs to customers?

The blog also doesn't acknowledge the externalities of shipping. Having a "Nike USA" brand that becomes their premium domestic flagship won't incur the same logistical expenses or tariffs. I may be biased because I'm from a debtor colony that understood there's no way free people can compete with slave labor, but the distaste for compensating workers is largely a classist taboo.

People are theorycrafting ways to lose, but I would only expect that from a company that was trying to signal their disdain for current trade policy, not actually run their business.

There's actually a really good argument in favour of that -- and in favour of paying income tax not as a direct tax (withheld from wages) but with a delay.

It makes the taxes visible and painful and they will therefore (potentially) not rise as fast or as much.

I think that's an argument, but not necessarily a good one

Need to balance transparency in pricing vs. visibility of taxes. I don't think sales taxes are actually all that visible most of the time- it's not like the cashier is telling you "and your taxes are $X." But it does make it much harder to detect if the store is charging you more than list price.

Every country has optimized their own economy so it's incredibly cheap for us to import shoes, or it was. Now it is not, so sure we could try to make some cheap shoes here. But now we have to make cheap shoes, grow cheap citrus veggies, make cheap computer chips, make cheap needles etc etc.

How much capacity do you think the US has to manufacture these things? and what about the supplies?

Just double checking, you are saying reduced competition and scale economics are "stupid edge cases"?

I’m saying that using a courtroom to decide the definition of a biscuit indicates a problem with sales tax legislation.

Flat rate sales tax has its problems, but avoiding Jaffa cake situations is entirely desirable.

Agreed, complex policies open the door for unintended consequences and have higher enforcement cost. If you do a sales tax or VAT it should be flat. If anyone thinks that it will be regressive or put poor people at a disadvantage, the answer IMO is UBI, even a small one can make up for sales tax on food while avoiding the deadweight loss from nonsense like that Jaffa cake nonsense.

This isn't what it says in the thread. It's saying Nike and retailers need to maintain their markup rate on their unit cost.

> And if Footlocker purchases Nike shoes for $75, then they retail them for $150. Everyone needs to fixed percentages to avoid losses.

The problem with your breakdown is you're mixing unit costs and net profit in a way that doesn't work. For example, say after increasing the price in accordance with your summary, the volume of sales halved (just to pick an easy number). Then the $17 marked as "Footlocker expenses" increases, likely to around $34, and Footlocker's profit becomes -$10. The absolute expenses haven't changed. They're still paying the same amount for their employees and storefronts. But with half as many shoes sold, the expense per shoe is doubled.

It's not just sales volume that affects the $17. Other costs like credit card fees or shrink scale with the unit cost as well.

It also puts more tax burden on the less wealthy. Sales tax is regressive; income tax is progressive.

But yes, that’s exactly why the American right makes taxation so cumbersome and horrible: to make people think that taxes are bad, as there’s this assumption you can have civilization without paying for it.

You can buy made in USA sneakers like New Balance 990 series. Generally all the materials except the sole are US sourced. Retails for $200 a pair. What kind of sneakers do you buy?

Running a manufacturing business in the US is more expensive. Consumers largely won't pay more, it's a limited market. The machinery for molding soles only makes economical sense at a large scale.

>And if a US shoemaker wanted to undercut the import, a Made in USA shoe that sells for $100:

Somewhere in there you have to also figure in the cost of the fact that shoe factories and the suppliers of the goods to make shoes also don't exist in the US and will cost millions, and years, to get setup.

They’ll pay more if the imported shoe costs the same or more.

The US does massive amounts of injection molding. I just signed off on my molds to be cut and run this month, how much experience do you actually have with this I wonder?