The consumer bears the cost. Remember that because it’s going to come up over and over and over, especially when it comes to talking about tariffs and whether you’re about to pay a whole lot more for consumer electronics.

I call it a terror over tariffs — or “terroriffs” — a fear that tariffs will automatically mean higher prices on some of the things we buy, especially items that already tend to be expensive. In order to understand how this plays out, let’s break down how tariffs actually work, how they affect supply chains, costs, and pricing, and when they can and can’t be used as a tool — a means to an end.

First, this is not a political post — at least, it’s not politically motivated. It’s about the intersection of politics and economics — political strategies and different policy possibilities. It’s also about the calculus involved in a number of potential scenarios that could end in consumer electronics, and specifically TVs, getting more expensive. Possibly a lot more expensive.

What is a tariff and how does it work?

Let’s start with the basics. A tariff is a tax on imported goods. The idea behind it is simple: When a government slaps a tariff on a product coming into the country, it forces the company importing that product to pay a fee to the government.

This warrants repeating: It forces the company importing that product, not the company making it, to pay an added fee.

It may sound straightforward, but here’s where misunderstanding can happen. Many people assume that tariffs are paid by the foreign companies selling goods to the US. However, that’s not how it works. The US companies who import those foreign products pay the tariff. And guess what? They don’t just eat that cost. They pass it on to retailers, who then pass it on to the consumer. The consumer bears the cost.

Let’s put that in real terms: Say there’s a new tariff on TVs imported from Mexico. Many companies based in Asia use Mexican manufacturing, so when the TV comes into the U.S., it comes in from Mexico, even if the TV brand is from China or South Korea. If a U.S. retailer like Best Buy buys a TV from a foreign manufacturer and suddenly has to pay an extra 10% tariff, that gets added to the final price of the TV.

Some companies absorb part of the cost to stay competitive, but only to an extent. Over time, the burden almost always makes its way to the buyer.

Why are tariffs imposed?

Tariffs are often used as a bargaining chip in negotiation tactics, but why else might they be imposed?

One common justification is protecting domestic industries by making foreign goods more expensive. The idea is that it would give US-based manufacturers a competitive advantage. If imported goods cost more, companies will have a stronger incentive to produce similar products at home in the US. If the cost difference isn’t that much, buy American.

There’s a fundamental problem with that notion, however. Few consumer electronics are made in the US, and moving large-scale manufacturing back to the US isn’t as simple as imposing tariffs. You have to build factories, create new supply chains, and — this one is huge — hire a workforce. It could take years, if not decades.

There’s also the issue of labor costs. Companies manufacture outside of the US because it’s significantly cheaper. In countries like Mexico and Vietnam, labor costs are a fraction of what they are in the US.

While some policymakers argue that tariffs can lead to more domestic production, the caveat is that it would take an incredibly long time to happen, if at all. If it did happen, goods would be far more expensive than they are now.

We’ve seen attempts to move manufacturing back to the U.S. before — most didn’t go as planned. A great example is Foxconn’s failed LCD factory. In 2017, Foxconn (who make a lot of Apple stuff) announced plans for a massive LCD manufacturing plant in Wisconsin with the promise of about 13,000 American jobs. Fast forward to today: That plant never became the large-scale factory it was intended to be. It’s basically a network and data center that employs almost 1,500 people. It went from a multi-billion dollar project to a just-under-$650 million project. Foxconn cited cost issues and shifting economic realities as the reasons for its demise. However, it received massive tax cuts, which helped get it to where it is today. Did we win? Did Wisconsin win?

When it comes to cost issues and shifting economic realities, labor costs are a huge factor — arguably the biggest factor. To put this into perspective, the average manufacturing wage in Mexico is around $4 per hour, while in the US, it’s closer to $25 per hour. That kind of wage difference makes it difficult for companies to justify large-scale manufacturing in the US when they can produce goods for a fraction of the cost elsewhere.

While tariffs might encourage some companies to rethink their supply chains, the idea of mass US manufacturing making a comeback is extremely unlikely. Instead, companies will look to shift operations to Vietnam, India, or Malaysia — places that already have an established manufacturing infrastructure.

You could argue that tariffs would raise prices on TVs and other electronics so much that they would be as expensive as the priciest electronics made in the US. However, I don’t think the math supports that argument — domestic products would still be significantly more expensive. Tariffs are not a “leveling the playing field” tool in this way. They can help counter artificially low prices created by foreign manufacturers designed to gut foreign economies — that’s where the notion that tariffs are a great equalizer tool may come from. However, in this context, tariffs won’t do that.

What’s more likely is businesses will take the more immediate and cost-effective route: shifting operations to another low-cost country instead of coming back to the US.

It’s possible that isn’t the end-game for the current administration’s tariff threats. What if tariffs are just a big bargaining chip in the game of negotiating something else?

Tariffs as a negotiation tactic

Another reason tariffs get imposed — or just threatened — is as a bargaining chip.

The administration has already made moves on tariffs related to Taiwan-made semiconductors, and there have also been threats of tariffs on goods from China, Mexico, and Canada. But are these threats just talk, or is there an actual long-term plan to use them as leverage in negotiations?

Before we’ve seen the US government threaten tariffs, only to walk them back later in exchange for better trade deals. The idea is to pressure other countries into offering better trade agreements or concessions on manufacturing, labor, or technology-sharing policies.

Here’s a recent example: In 2018-2019, tariffs were placed on goods from China, affecting everything from washing machines to circuit boards. Some companies adjusted their supply chains, while others waited for negotiations to play out. Some of those tariffs were eventually reduced or eliminated through trade deals.

Could that happen again? Absolutely.

But the big question is: How will companies react this time? Once you know your opponent’s tell — once you know they are bluffing or have some ulterior motive — you might play the game differently.

How could manufacturers respond?

Historically, when tariffs do go into effect, companies don’t just sit back and take the hit. They look for workarounds. One of the most popular strategies is to move manufacturing to avoid tariffs entirely.

A lot of TV production happens in China, Taiwan, South Korea, and Mexico. If tariffs hit those countries, what’s the alternative? Some companies might shift assembly to Vietnam, India, or Malaysia — places that already have some manufacturing infrastructure.

That makes much more sense than suddenly starting to make TVs in the US. But, there’s another positive consequence. We don’t want all of our goods made in a few pockets around the globe. Think of it this way: If all the world’s zippers were made in Japan (and, parenthetically, many of them are – check your zippers: most of them likely have “YKK” on them) and the country had another natural disaster that wiped out zipper manufacturing, that hit to the clothing supply chain would create mass chaos. Zippers need to be made in many different countries across the globe. It’s good for competition and it’s good for the supply chain.

I’m into the idea of TVs being manufactured in more countries. But making TVs in the US again? It’s extremely unlikely. Manufacturing TVs domestically is incredibly expensive compared to overseas. Labor costs are higher, the infrastructure isn’t set up for mass TV production, and companies can’t build new facilities overnight. Moving a factory to another country with an established supply chain? That’s doable. Moving it to the US? It’s not going to happen.

Will TV prices skyrocket?

In the past, there have been threats of tariffs that weren’t imposed. In 2019, the presidential administration announced new tariffs on consumer electronics — expected to include laptops, smartphones, and gaming consoles — from China. After pushback from tech companies and trade partners, the tariffs were delayed and then eventually scaled back. Trade agreements mitigated their impact on many consumer electronics.

This scenario is important to keep in mind: Just because a tariff is proposed doesn’t mean it will happen, and if it does happen, it may not be as extreme as initially feared. That’s why I think we have to adopt a wait-and-see policy. Threats don’t always turn into actual tariffs, and if tariffs are levied, it doesn’t mean they will stick around for long.

Also, companies will adapt. Some will shift manufacturing, some will absorb costs, and some will find loopholes. That doesn’t mean prices won’t go up — it means it’s not as simple as “tariff goes up, price skyrockets.”

We’ve been here before. When past administrations imposed tariffs, many worried about massive price increases. Some happened, but not to the extreme that people feared. Companies made adjustments, deals were struck, and eventually, things stabilized.

Should you buy a TV now?

What’s the takeaway? We don’t know exactly what’s going to happen yet. What we do know is that if tariffs go into effect, consumers will feel it in some way — whether that’s higher prices, fewer choices, or manufacturers shifting operations.

The best thing to do right now is watch closely and be ready. If you’re in the market for a new TV, I’d suggest buying one now. It’s one of the best times to buy a TV in the normal product cycle. Considering that we don’t know if prices will increase, there’s an even greater incentive to punch that “buy” button.

If you’re not ready to buy now, keep an eye on whether these tariffs actually materialize. If they do, expect to see some price hikes before long. Most brands won’t announce TV prices until March or April — there’s still time for them to jack up prices to hedge against the threat of tariffs (I’ve seen companies adjust prices up and down the day before they’re officially announced, waiting until the last second to make a decision).