GOLDSTEIN: Mark Carney’s latest counter-tariffs a multi-billion-dollar tax on Canadians
· Toronto Sun
The ongoing tariff and counter-tariff war between the U.S. and Canada is better described as a taxation war, in which each country imposes regressive taxes on its own citizens that raises their cost of living.
Visit playerbros.org for more information.
On Tuesday, Prime Minister Mark Carney will impose Canada’s latest round of counter-tariffs of between 15% and 50% on $28 billion worth of U.S. imports.
That’s in response to the latest wave of 50% tariffs on $28 billion worth of Canadian goods imposed by U.S. President Donald Trump, who has threatened more tariffs in response to Carney’s new counter-tariffs.
University of Calgary economist Trevor Tombe, writing in thehub.ca , estimates Carney’s latest counter-tariffs will cost Canadians almost $4 billion in the coming months, which he describes as a minimum because, “it doesn’t include the possible rise in the price of substitute goods.”
RECOMMENDED VIDEO
Lower-income families to be hit hardest
Lower-income families will take the hardest hit because tariffs are a regressive tax, unlike income taxes that are based on the principle that the more one earns, the more one pays.
Tombe estimates the latest round of Carney counter-tariffs works out to a response of about 60 cents to every $1 of U.S. tariffs Trump imposed on American consumers – not quite the “dollar-for-dollar” response Carney touted, but still substantial.
It also comes on top of earlier counter-tariffs Carney imposed on Canadian businesses and consumers in response to earlier tariffs Trump imposed on Americans, raising their cost of living.
That’s because a tariff is a tax imposed on the citizens of the country that imposes the tariff, which raises revenues for that government.
In the case of Canadian counter-tariffs, Canadian companies and individuals importing U.S. goods pay them to the Canadian government, increasing federal revenues.
The Carney government says these revenues are used to support Canadian businesses and workers hardest hit by U.S. tariffs.
Meanwhile, Canadian consumers pay higher prices for these goods as Canadian importers pass along their increased costs to the public in order to recover all or part of their higher costs over time.
Tombe estimates the overall increase in consumer prices in Canada from counter-tariffs this time will be about 0.25%.
“That may sound small,” Tombe writes, “but some products are affected more, including various personal items, household goods, recreation and food.
“Even the overall 0.25% increase is not trivial. Compared against the 2% annual target for consumer price growth, it is a decent share of that total.
“It is also roughly equivalent to a $10-per-barrel increase in oil prices or … to the entire effect of a $30-per-tonne carbon tax on average consumer prices.”
Because low-income households spend a larger proportion of their income on necessities than high-income ones, Tombe estimates a family with an income of under $30,000 annually will lose more than 0.5% of their disposable income as a result of these retaliatory tariffs – more than three time larger than the hit to households earning over $150,000.
Families with children will pay roughly $250 per year because of the new Canadian counter-tariffs, while those without children pay less than $170.
Counter-tariffs can also have negative impacts on domestic economic growth, business investment, productivity and exports to other countries beyond the U.S.
RECOMMENDED VIDEO
U.S. consumers and businesses also impacted
Of course, all of these downsides also impact American consumers and businesses, whose costs will increase because of the new tariffs Trump has imposed on Canadian imports that Americans will pay.
The political theory behind imposing tariffs is that the economic hardships they impose on the targeted country including reduced exports, higher business costs and layoffs, will cause public pressure within the targeted country aimed at their own government, to lower trade barriers.
Tariffs and counter-tariffs are blunt economic instruments based on the theory of mutually assured destruction.
That’s what many countries didn’t respond to Trump’s tariffs with equivalent counter-tariffs because of the additional damage it would cause to their own economies.
Canada and China were the most aggressive countries in levying counter-tariffs against the U.S., but Carney himself has acknowledged we can’t win a long-term, dollar-for-dollar tariff war with the U.S. because its economy is 13 times the size of ours with a population more than eight times as large.
In fact, Carney has dropped many Canadian counter-tariffs during the trade war because of the damage they were causing to Canadian companies.
Tombe said he’s not arguing economic retaliation against the U.S. through counter-tariffs is wrong, noting polls show they are popular with the public.
But he does believe they’re unwise, that Canadians should be aware of the costs and that ultimately we need to focus on strategies that boost the Canadian economy.