Trump said: we will impose tariffs on Chinese imports.

When products are brought into the U.S., the tariff is calculated based on the declared value of the goods at the point of import, not on the retail price at which they’re sold.

This declared value omits additional costs such as labor, marketing, logistics, rent and the profit margin that retailers add. Consequently, the price on the shelf can be significantly higher than the tariffed import value.

so, what will importers do to respond to tariffs?

solutions:

Absorbing tariffs:

Importers might pay the tariff out of their profit margin to stabilize consumer prices.

Sourcing from alternatives:

They could shift production to countries with more favorable trade agreements with the U.S.

Increasing prices:

As a last resort, if neither absorbing the cost nor changing suppliers is feasible, the price to consumers might increase.

If importers discover cheaper alternatives, they’ll shift their sourcing to maintain profitability. Otherwise, they have to decide whether to absorb the cost or pass it on to consumers, depending on how much the market will tolerate the price hike.