Source: Foundation for Economic Education
by Alex Tabarrok
“Many people think they understand why domestic prices rise with tariffs — domestic producers take advantage of reduced competition to jack up prices and increase their profits. The explanation seems cynical and sophisticated, and it’s not entirely wrong, but it misses deeper truths. Moreover, this ‘explanation’ makes people think that an appropriate response to domestic firms raising prices is price controls and threats, which would make things worse. In fact, tariffs will increase domestic prices even in perfectly competitive industries. Let’s see why.” (04/16/25)
https://fee.org/articles/why-do-domestic-prices-rise-with-tariffs/