Recent polls in this country indicate that upwards of 70 percent of Canadians believe we should impose tit-for-tat, dollar-for-dollar counter tariffs on US goods, should The Donald follow through with his threats to impose 25 percent tariffs on Canadian goods (10 percent on oil).
While that immediate, dare we say kneejerk, reaction to those threats is perfectly understandable given the shock and betrayal felt by most Canadians to this unwarranted attack on our economy, there is a very good reason to give that strategy a sober second thought.
Tariffs are, at the end of the day, a tax. While the President likes to paint tariffs as a penalty that will be paid by those supplying the US with goods and services, it is US consumers who foot the bill at the end of that day—not the supplying country’s industries. Canadian businesses don’t pay the tariff, the importing American businesses do, and by extension, the American consumer.
Certainly, the impact of tariffs has the potential to be devastating to many Canadian businesses, especially the auto industry, which is so integrated with the US and Mexico. That it will be a pox on both our houses.
So, if tariffs on Canadian goods entering the US are actually a tax on Americans—what of those countervailing tariffs we would impose on US goods and services? It is Canadian consumers, already reeling from the impact of shuttered or downsized businesses, who will feel the pain.
The sad reality is that our tariff impact on the US economy would be less than a two percent hit, likely far less, in fact. Certainly, those impacts will be unequally felt across US states, with some, especially Northern states being hit harder than others. The clever plot of our leaders, current and potentially future, is to levy tariffs strategically to have the most impact on those states most supportive of the president. Given the roughshod dismantling of American democracy being perpetrated by the current POTUS and his messianic vision of his destiny, that approach likely won’t amount to as much leverage as we might hope.
So, the result of countervailing tariffs will be a tax on Canadians—just as the US president’s tariffs will be on Americans.
This smacks somewhat of cutting one’s nose off to spite one’s face. Countervailing tariffs will only cost Canadian consumers. Albeit the revenue from such tariffs could be utilized to soften the blow to Canadian businesses impacted by the US tariffs—it is the Canadian consumer who will bear that cost.
Worse yet, the imposition of countervailing tariffs will only provide cover for even more draconian assaults on our economy by a megalomaniac who has demonstrated he has no problem distorting truth or inventing facts to suit his purpose and who demonstrates a complete disregard for the rule of law.
A more productive approach, we might suggest, is the grassroots efforts by Canadian consumers to “buy Canadian” and to simply ignore the US tariffs as best we can, should those tariffs come to pass. This will strengthen our own economy while not penalizing our own consumers with a “hidden” tax.
The cost of The Donald’s assault on our economy will be borne by American consumers—and there will be less cover for subsequent escalation through this strategy. We say “less cover” because reality demonstrably does not play as large a role in America today as it has over the past century of being the bastion of freedom and Western democracy.
When it comes to countervailing tariffs, let’s leave our noses safely in place, no matter how out of joint they may be in the present moment. It’s time to think outside the box and to act strategically rather than reactively. That won’t be easy, especially given the current ascendance of populist politicians across the nation—but it is the best course forward.
If a mouse is going to wrestle an elephant, brute strength should be off the table when it comes to strategy in the ring. Let the behemoth wear itself out so that reason can prevail.
