The Concept of Supply & Demand

In Today’s Political Environment

I have considered myself to be apolitical and/or non-political, but the activities of the past month, by the new Administration, calls for me to discuss the impact of tariffs and other financial decisions that are underway.

I am sure that all agencies of our government can operate more efficiently, as can most corporations. However, there is a right way and a wrong way of reviewing how to make an organization more effective. Obviously, I believe that “DOGE” is the wrong way. In order to be effective, one must have knowledge of what the mission is of the organization, and then review how the organization is accomplishing that. By doing so, you can determine the most effective means of making that organization more productive. Sending a group of 19 to 25 year old computer specialists into an organization, to terminate individual workers, or cancel contracts, isn’t the right way. Their mission appears to be to just eliminate jobs, no matter what the impact might be. What happened to “common sense” or “critical thinking?”

As pressing, is the on again, off again, tariffs. One day we are putting tariffs on our largest trading partners, and the next day we are putting them on a 30 day hold, and then we are increasing them to unrealistic levels. This “Yin” and “Yang” isn’t good for our economy, or the other countries economy. Obviously, the stock market has indicated their view, by showing substantial declines in the past two weeks.

For the past 40 years we have been embracing the concept of a global economy. There is no question that different countries have different strengths when it comes to producing goods and services. They also have different natural resources. Doesn’t it make more sense to embrace these differences, and play to your strength. Why would I want to try to compete against another country for a specific good or service when my price is twice as high? It has also been thought that the more that countries participated in the “global economy,” fewer conflicts between nations would occur, because it wasn’t in their “economic interest.”

That concept appears to have been eliminated by the new Administration, as it appears to lean more toward being an isolationist country.

Now to tariffs, and “supply & demand.” One of the first economic principles that one studies in a basic economic course is “supply & demand.” That is the foundation for all economic theories.

The concept of supply and demand is actually fairly simple. As prices increase, demand generally falls and supply increases. When prices fall, demand increases and supply declines. Obviously, there are always variations on this, but in essence this is the theory of supply & demand.

The objective is to try to find that price equilibrium where demand and supply are equal. That obviously isn’t always possible. Some of the factors that affect supply and demand are government regulations, taxes, substitute goods and services, supplier market power and economic cycles.

As we put tariffs on other countries goods and services, it is the consumer that ends up paying more. The importer of the goods and services pays the tariffs and then passes it on to the consumer. The government does not pay the tariffs. The current Administration’s concept of imposing high tariffs, up to 250%, is an attempt to have the consumer “buy American.” However, that isn’t always possible in a Global Economy. That particular good or service may not be available, and the cost to establish a facility to produce such good or service may be cost prohibitive. In addition, the specific labor supply may be limited.

That is certainly the case in the electricity supplied by the Province of Ontraio, Canada. It has been reported that they currently supply the electricity for 1.5 million homes in New York State, as well as homes in Wisconsin and Minnesota.

During the winter months, it has been reported that Mexico supplies more than 70% of all fruits and vegetables consumed in the United States.

For the automotive industry, parts flow back and forth between Mexico, Canada and the United States.

Many of the agricultural products that we import from suppliers in Brazil could be going to China in the future. That could create a supply issue here, and the possibility of increased prices.

The concept that these tariffs would contribute positively to our governbment’s budget is inherently false. The country that we impose tariffs on would look to alternatives, and as a result, our countries suppliers could see their sales decline, and an economic recession would be a real possibility.

It is difficult for me to understand how supposedly intelligent individuals continue to postulate themselves, in our Congress and Leadership, on economic theories that are obviously false. Fortunately, there is an election in two years, but can we survive that period of time. We are beginning to become the laughing stock of the world. Whatever happened to the concept of “stand up and be counted?”

Jess Sweely

Madison Virginia

March 10, 2025