Doesn't this analysis kind of break down if all of a sudden the domestically produced products shoot up in price because all of the components and raw materials are now subject to large tariffs? Suddenly there is a lot more room for profit if the prices of your competition goes up.
Yes, for domestic manufacturers. To go with the bicycle example, you could assemble bicycles in the USA for a specific niche, maybe cargo bikes or tricycles for the mobility impaired. The frame, wheels, tyres, brakes, gears, seats and other parts would be imported with tariffs paid. There would be several suppliers and limited options for Hollywood accounting.
Most of the costs would be in assembly, marketing, retail, shipping and sorting forth, so there would be just the imported parts to get the tariff tax, but you could just pass those costs on, for the customer to choose a lower specification model of they can't afford the product.
Some easier components could be sourced from the USA, for example, the handlebars are just a bent tube, so why get a Chinese person to make it? However, the aluminium for that tube will be taxed with a tariff so it is unlikely that a guy down the road will step up to make these things.
As mentioned, it will be like Brexit, the worst fears won't materialise, people will still be eating food and everyone will just become a lot poorer with a stagnant economy.
With Brexit the little guy stopped selling to Europe but the multinational didn't skip a beat.
