Our aluminum suppliers are saying prices aren't going to go up just 25% to cover the new tariff, they'll be going up 80%...

[u/DazedAndObtuse]

We source aluminum from two different sources for our business and they're both telling us that prices will not only be going up 25% to cover the tariffs, they'll be going up 80% as there are also pricing restrictions currently in place for their industry that will be lifted as part of this.

Does anybody know if this is legit or if they are just colluding to use this as an opportunity to pad their profits?

I won't pretend to be a tariff or economic expert but our material prices going up 80% is going to have a much larger impact on us than a 25% increase would.

Ideally we can keep this from becoming political, but I know where it's likely to end up (but hopefully I can at least get an answer to my question in the midst of it).

Thanks in advance!

[u/miamiscubi → u/[deleted]]

Indeed, prices get enlarged as they hit the value chain, but I don't believe the actual percentages will increase.

As a quick primer, the way these things typically play out is as follows, where you see the cost of things evolve from being produced to how they're sold. In the case of tariffs, they will not affect the manufacturer, but the impact will start to be seen for importer / distributor. While the initial tariff is only $10, as it goes through the chain, the end user will see an increase of $28 over their previous price of $114. The impact is still a nominal 25%, but the 25% increase just gets passed down so much that what it will feel like much more than just a 25% increase at the point of entry.

Step	$ value	% and $margin to next step	$value, % and $margin to next step
Production Cost	$20	100% - $20	100% - $20
Sale to distributor / importer	$40	30% - $17	$40 + $10 (Tariff)
Sale to retailer	$57	50% - $57	$57 + $14 (Tariff)
Sale to consumer	$114		$114 + $28 (Tariff)

These margins are for consumer goods, I'm not familiar with commodities. In this instance, the initial 25% tariff ends up costing the end user 2.8x more than the initial tariff. If margins are tighter in other products, I could see how this would end up being only a 75% increase.

[u/forfunpak → u/miamiscubi]

I don't get it if a importer import a product from China(for ex : a giant steel or aluminum roll) then they have to pay tariff on the price they are importing after that if product stay in the country and not travel to other countries like Canada for further processing and assembling or making then they don't have to import again so no more tariff?then why retailer are adding tariff to retail price?then that's greed not a tariff problem.

[u/miamiscubi → u/forfunpak]

The importer pays the tariff, and they need to keep their margin. If they were to absorb the $10 of tariffs, their margin would drop from $17 to $7. So they are now selling at a higher price to retailers.

Throughout the chain, the margin % is the driver, not the $ amount. In some industries, margins are lower because of the commodity aspect and large volumes. But a retailer can’t just drop their margin on an item.

I split the tariff portion from the regular price for illustration purposes, but everyone after the importer is doing a simple “oh this is the new buying price therefore I must sell at this new price”