When UPS charged me a $684 tariff on $355 of vintage computer parts

Tariffs are great. They protect the struggling domestic IT industry and gives it time to ramp up its production of vintage computer parts.

I know one US business that used to make niche electronic product. Most components they used were from China. Got hit by the tariffs that wiped all the operating profit. Guy also had to sell his home and is now couchsurfing. Business is unlikely going to recover.

Of course he considered making chips and other components in the US, but he was few billions short to start the fab.

a purported niche/low-volume electronics, but the profit is somehow dependent on BOM price? a tariff bump on a small BOM doesn’t take you from profitable to homeless.

if that happened, the business already had seriously bad margins, bad cash flow, over-leverage, or maybe he was just doing it out of love getting paid maybe back for his time or not.

tariffs might’ve hurt, but they don’t collapse a healthy niche hardware company where buyers are presumably also into the niche.

seems weird i dont get it. can you explain further?

Hardware companies often operate on a relatively thin margin, especially as compared to say, software companies.

Let's say a companies margin was 40%. The cost of their constituent parts doubles due to tariffs, they are no longer making money as a result.

I hope this helps explain it for you.

It's more complicated than that.

For example, the company can raise its prices. How well that works depends on whether there is competition for the company's product. If the competition is also hit by the tariffs, then they're on an even playing field. If the competition is using native parts, then the competitor gets the business.

This is one of the great misconceptions.

There are often no "native" alternatives.

Even the machines that make the chips are nearly all made in one country and then shipped around the world.

The amazing, modern nature of our modern world is built on the collective effort and knowledge of humankind globally.

Globally.

There's concern that if all our chips come from one country, they could cut the supply off and make demands. That's called an "embargo".

It's also done to protect local industries, hence the term "protectionism". For example, Canada's large tariffs on American milk are there to protect the local Canadian milk producers.

AFAIK, Trump's tariffs are meant to serve the following purposes:

1. so critical supplies, like chips, will be produced domestically

2. to raise money for the treasury

3. to convince countries that have high tariffs to lower them in exchange for the US to reciprocate in lowering ours

4. to incentivize foreign manufacturers to invest in factories in the US

5. to use them as a negotiating tool for other terms favorable to US interests

These are not crazy things. We'll see how things play out.