Tariffs
Truman Burbank Hits the Wall
Act One: Slip Sloshing Away
Client (“C”) to Advisor: I want to talk about tariffs.
Advisor (“A”) to Client: Why are we meeting in a bar?
C: I’m getting twofers.
A: And why are you wearing a toga?
C: I’m John Belushi, you know Bluto from Animal House.
A: You’re getting twofers? It’s not happy hour.
C: It doesn’t matter. The bar is selling bourbon at half price.
A: What does this have to do with tariffs?
C: I saw a list on CNBC on April 4th that because we’re putting tariffs on some “Made in China” products, they’re putting tariffs on some “Made in the USA”, products, like bourbon.
A: You saw that on a list?
C: Yes, Number 21, right after non-frozen orange juice.
A: So, what’s the point?
C: I read in ChinaDaily.com.cn on April 28th that some bourbon makers sell up to 50% of their bourbon in China.
A: Yes, that’s true.
C: So, if it costs more for the Chinese to buy bourbon in China, they won’t drink as much and our companies will have too much bourbon in their warehouses.
A: That’s also true.
C: And remember you taught me when a company has too much bourbon they have to lower their price to sell their extra bottles?
A: And?
C: So, the bar is selling two bourbons for the price of one.
A: So why the toga?
C: If Bluto can swig one bottle of Jack Daniels, for the same price I can swig two.
Act Two: The Dregs
A: Well, there is another way of looking at it.
C: Uh, oh.
A: Once the bourbon maker sells his excess inventory, to stay in business he still has to sell the same amount of bourbon. He can’t lose any sales. He needs to find new markets.
C: That’s kind of tough with tariffs, right?
A: Yes. But regardless of the amount of bourbon he sells, he still has the same fixed costs. Sales go down, costs stay the same and pretty soon he’s out of business.
C: So, he’ll lower his costs.
A: Oh really. The landlord won’t lower his rent, Google won’t lower their ad rates. There’s only one of two things he can do.
C: Hear comes the bad news.
A: Right, he can either fire people or lower their salaries.
C: I knew you would say that.
A: How much money do you make?
C: $11 per hour.
A: Are you serious? That’s below minimum wage.
C: What’s a minimum wage?
A: Never mind. Either you work for $7 an hour, or you’re out of a job.
Act Three: Back to the Well
C: I got it. There’s something else I can do.
A: What is that?
C: Drink scotch.
A: We might put tariffs on “Made in Europe”, which means a bottle of scotch will cost more.
C: How about Canadian Whisky?
A: NAFTA, nada.
C: Tequila?
A: Mexico NAFTA, double nada.
C: So, it sounds like no matter what I want to drink, tariffs are a bad thing.
A: I’m afraid so.
C: Can’t I ask you one more question?
A: Shoot.
C: Why are you such a downer?
A: There’s nothing happy about tariffs.
C: Bartender, make that three bourbons.