We're going to try to keep this as politically neutral as possible, but as you're likely aware tariffs have been in the news a lot lately, and often with some head-scratching claims.
As an importer of goods manufactured outside the US we wanted to take a moment to clearly explain the actual math behind how tariffs affect price. This will be in two parts
- How do tariffs affect customer pricing in general?
- How will they affect Antlion pricing going forward?
Part 1: The Math Problem
Tariff cost is paid by the importer (Antlion Audio) to the government you're importing to (in our case, the USA typically).
The amount is equal to the cost of goods to manufacture (not retail price) multiplied by the tariff percent. We'll use big round numbers to keep this math as simple as possible.
Assume the following: We want to make $10 per unit sold.
| Before Tariffs: | After a 100% Tariff: | |
| Cost to make the product | $10 | $10 |
| Tariff | $0 | $10 |
| Retail Price | $20 | $?? |
What's the new retail price?
If you said $30 ($10 cost of goods + $10 tariff + $10 profit) you'd be right, but only if all of your sales are direct to consumer. If you have any other partner (distributors, retailers, etc) then the answer is more than $30.
The problem with tariffs is that they put a larger burden on consumer prices than they collect in tax revenue.
The core of this problem comes from the fact that even a relatively small company like Antlion Audio doesn't sell all their goods directly (not even close!). Retailers and distributors operate on a "margin requirement." Let's assume we have a retailer who has a 50% margin requirement.
In simple terms this means the retailer is buying the product at half the retail price. So for us to make $10 per unit the math is like this:
| Before Tariffs: | After a 100% Tariff: | |
| Cost to make the product | $10 | $10 |
| Tariff | $0 | $10 |
| Sell to third party | $20 | $30 |
| Retail Price | $40 | $60 |
So the government collected $10 in taxes but the consumer paid $20 more! This is why economists generally don't prefer tariffs over other forms of taxation. This effect is less visible if the tariff % is lower and/or the average margin is less, but it's always inefficient.
Ironically it causes the revenue of sellers to increase until demand drops due to higher prices. Since we can't undercut our retailers by selling our mics directly for cheaper or they won't work with us, the result is tariffs have created more revenue for the retailers and the government at the cost of the consumer.
While the ideal solution is everyone agrees to a lower margin % but higher price to make this burden equal, the reality is it would require every company to re-negotiate every contract with every vendor every time the tariff changes. Over time this could happen if rates remain high or increase too far, but for the most part, companies take the path of least resistance and just keep the margin % static.
This is the problem with tariffs.
Part 2: Our Price Problem
We're going to do our best to minimize the impact of tariff on the final price of Antlion Audio products, likely at the cost of our own margin a little bit. These changes are expected to occur starting in April.
The EU, Canada, and UK may get a minor adjustment for exchange rate fluctuations, but will likely remain the same for most regions and products.
Given we're offering free shipping this month, and next month will have a price increase to many locations, we wanted to take this moment to both warn and inform everyone so you can buy before anything changes.
Want to discuss tariffs and trade in more detail with our team? Stop by our Discord and hit us up!