Rant on Tariffs and Inflation

Hello, welcome to my thoughts on tariffs and inflation. Here's a bit of background: I sell a digital product online and have a significant number of Canadian and European customers, along with others around the world. My business extends well beyond the United States.

The Impact of Tariffs

When the idea of tariffs was introduced, I immediately started researching. I realized I needed to read the USMCA and examine Canada's list of retaliatory tariffs on U.S. goods. I had to consider the implications if the U.S. imposed tariffs on Canada, Mexico, or the EU, and if retaliatory tariffs would affect my product.

Digital Goods and Tariffs

The good news is that the USMCA prohibits tariffs on digital goods. Digital goods are inherently difficult to tariff because they don't cross borders in the traditional sense or go through customs. It's challenging to imagine a scenario where digital goods are specifically targeted without a prolonged trade war or a significant effort from one side. Currently, neither the U.S. nor Canada has the mechanisms to impose tariffs on digital goods effectively.

The Real Issue: Customer Confidence

The real concern isn't the potential 25% tariff itself—I'd be willing to offer a 25% discount to my customers to offset it. The core issue is the impact on customer confidence in the EU and Canada when considering purchases from U.S. companies. If the U.S. starts imposing tariffs broadly, it could erode trust and confidence in U.S. businesses.

Marketing and Messaging

To address this, I need to develop a marketing campaign that communicates our stance against tariffs. We could emphasize that we absorb the tariff costs and offer discounts to our customers who are affected by them.

Broader Implications

Even if digital goods aren't directly targeted by tariffs, U.S. suppliers in Canada and the EU might face negative repercussions. Companies may instruct their procurement teams to be cautious about buying from U.S. companies if alternatives exist, due to the uncertainty tariffs introduce.

Inflation: A Misunderstood Term

Many claim that tariffs are inflationary. However, the term "inflation" is often misused. Inflation should refer to what we now call "monetary inflation," a purely monetary construct. It's important to distinguish this from price changes, as inflation is the result of market dynamics.

In conclusion, while digital goods might be safe from direct tariffs, the broader implications on customer confidence and international trade relationships are significant concerns that need addressing.