The trade war between Canada and the United States has officially kicked into high gear after high stakes talks between the two countries collapsed last weekend.
President Donald Trump’s escalated tariffs came into effect late last month and a series of Prime Minister Mark Carney’s Cabinet members unveiled roughly $27.6 billion in counter-tariffs last Tuesday, to take effect on Sept. 8.
In the weeks leading up to the collapse of trade talks, Canadian politicians took to U.S. airwaves, warning that Trump’s plans to increase tariffs on Canadian goods entering the United States would backfire by raising costs for U.S. consumers.
“A tariff on Canada is a tax on the American people,” said Ontario Premier Doug Ford on American television just last weekend.
Those politicians, like Ford, were right.
Unfortunately, the federal government has chosen to respond to Trump’s tariffs by introducing tens of billions of dollars of tariffs of its own, which will only serve to raise costs for Canadian consumers.
“When the United States asked too much and offered too little, we chose to stand up for Canadians,” said Finance Minister François-Philippe Champagne. “Our dollar-for-dollar, rate for rate counter-tariffs as well as a multi-billion-dollar support package will protect workers, farmers, families, and businesses as a we build a stronger, more resilient, and more diversified economy.”
But anyone who believes that tariffs are the solution to Canada’s trade problems, not to mention the present cost-of-living crisis, is kidding themselves.
Everything from frozen fish to air conditioners will be tariffed under Ottawa’s retaliatory tariff plan, driving up costs for essentials at a time when Canadians need a break the most.
Canadian consumer debt just hit a record $2.6 trillion.
“There seems to be a significant amount of uncertainty in the current environment and we need to be aware of the impact that any additional economic pressures could have,” said Rebecca Oakes, vice-president of advanced analytics at Equifax.
Well, tariffs certainly qualify as additional economic pressures.
As Canadian politicians have said all too well to American audiences, tariffs are taxes on domestic consumers. Ottawa’s “dollar-for-dollar” tariffs, while targeted toward certain sectors, will still raise costs for Canadians at a time when folks can ill-afford it.
Notice, too, that Ottawa’s tariff announcement included no relief for Canadian consumers. There were some targeted announcements for businesses but nothing to help consumers who will be pummelled with higher costs.
Many Canadians were likely looking for some kind of response from Ottawa to Trump’s latest round of tariffs. Being upset by them is understandable. But Trump’s tariffs are a tax on Americans. Responding by taxing ourselves in turn is far from the ideal solution.
Ottawa should be focused on responding in other ways: considering much-needed tax reform, ensuring the provinces actually dismantle Canada’s internal trade barriers, speeding up construction of new ports and pipelines, and negotiating trade deals with other countries.
As just one example, a report from the International Monetary Fund released in January noted that Canada’s internal trade barriers represent the equivalent of a domestic nine per cent tariff. Why isn’t there clamoring from politicians across the country to actually deal with trade barriers here at home that are holding our economy back?
Tariffs and handouts are tired old solutions from an era that has come and gone. Just because Trump is pursuing bad policies south of the border doesn’t mean we have to respond in kind. A response is necessary, yes, but our response should be smart, too.
When kids are growing up, parents often tell their children not to copy silly things that their friends do just because their friends are doing them. The same lesson applies here: just because Trump is pursuing a bad policy doesn’t mean Carney needs to do the same.
The best way to respond to Trump’s tariffs is to strengthen Canada’s economy. Tariffs do nothing but weaken it.
Jay Goldberg is the Canadian Affairs Manager at the Consumer Choice Center. He previously served as the Ontario Director at the Canadian Taxpayers Federation and a policy fellow at the Munk School of Public Policy and Global Affairs. Jay holds a Ph.D. in Political Science from the University of Toronto.
