Gort
Yeah, they're getting ripped off and the end consumer is getting ripped off.
If the company publishing the DVDs or another third party distributor first imported the goods to America, the tariffs wouldn't be applied to the wholesale cost. The tariffs would be applied to the cost paid to the manufacturer. In other words, the retailer wouldn't be paying tariffs at all. But because some online retailers are buying directly from Chinese or foreign distributors, the customs value, or the transaction value, is closer to the wholesale cost rather than the manufacturing costs.
It shouldn't be that way. For example, if I own a toy shop, and I buy some Hasbro toys, they're going to come straight from an American Hasbro warehouse. Or the warehouse of an American toy distributor. I'm going to pay the wholesale cost. Someone else already paid the tariffs down the supply chain. And when the tariff was paid, it was based on the transaction value between the importer and the manufacturer, which is much lower than the wholesale price, obviously. Now, Hasbro or the distributor could choose to increase their wholesale prices based on the increased costs from tariffs, but that retailer isn't in that equation. That's at the discretion of whoever is doing the distribution. The retailer has nothing to do with tariffs if they're dealing with domestic distributors, as most legitimate businesses do.
In the case of Orbit DVD, if they're buying wholesale from a UK distributor, then it's likely that the distributor paid the Chinese (or Vietnamese, German, etc.) tariffs. Orbit DVD would pay a tariff on the wholesale price based on UK tariffs. Remember, tariffs are based on the transaction value, and the transaction value between a retailer and a distributor is the wholesale price.
Since America imposed a 10% tariff on the UK, which is up from the previous 2 to 3% tariff, the wholesale price would be increased by a maximum of 8%. However, we don't know what that price is. Maybe Orbit DVD was paying $5 for DVDs that they were selling for $30. An 8% increase on $5 is $0.40. That wouldn't justify a "tariff surcharge" of 5% on the MSRP of an item that's $30. That would be a $1.50 increase. So the retailer would be making a $1.10 profit on these "tariff surcharges." Pretty scummy. But again, we don't know for sure. We're just expected to take their word on all of this.
Funnily enough, retailers never implemented a 3% "tariff surcharge" on the previously existing 3% tariffs on UK goods — they would just markup the MSRP accordingly, taking into account price elasticity, to help pad their margins. But usually they didn't do this, and tariffs resulted in no changes to the price at all because goods are never perfectly price inelastic. Because of the reality of price elasticity, taxes and tariffs are never 100% passed down to consumers.
Most plastic shit like toys, or luxuries like movies, games, and collectibles, have a high degree of price elasticity, This means that as price increases, demand decreases. Toys are something that most people are fine without buying, and so they'll just pass on them if the price increases, meaning demand decreases.
And if your supply chain isn't all sorts of fucked up and you're not getting scammed by distributors and middle men, cheap plastic shit like toys manufactured in China have high margins — it costs a few cents to manufacture a toy that sells for a few dollars thanks to the power of Chinese child slave labor.
So if an item has price elasticity and it has high margins, it makes the most sense for businesses to take the hit at the border for a few extra cents rather than passing the cost along to the consumer and decreasing demand on products with profit margins higher than a few cents. Because taking the small hit to your margins is better than significantly losing sales. This is ECON 101.
So basically, "tariff surcharge" nonsense is just retarded price gouging.
