An Associate Professor of Economics says if the United States imposes tariffs on Canadian goods after the 30-day pause the best course of action for Canada would be to not retaliate.
Associate Professor in the Department of Economics at the University of Lethbridge and Co-ordinator of the Agricultural Studies Program Danny Leroy says what people need remember is goods do not pay tax, which is esentially what tariffs are, but rather individuals pay tax.
“When Donald Trump was proposing putting tariffs in place, he is putting taxes on American citizens who are wishing to import products produced in Canada. So it’s Americans that pay these import taxes, it’s not Canadians and the consequence is that it’d be things that Americans buy that are imported from producers in Canada,” Leroy says.
According to the economics professor, this will mean americans will see the price of the goods they’re purchasing go up which will result in the demand for Canadian products south of the border most likely go down.
“This doesn’t mean that these goods vanish off the face of the planet. They just find the next best market, the next best outlet and that might be in the domestic market, that might be in consumers that are somewhere else, maybe they’re in Europe or they’re in the Pacific Rim.”
According to Leroy the 30-day pause in place not only gives the federal government a chance to work with the U.S. government, but it also gives Canadians and Canadian producers the chance to isolate themselves from the possible impacts the proposed tariffs could have. However, he adds looking at the response the Canadian government has said they will enact if the U.S. tariffs move forward creates the narrative “Supposedly, you are in a trade conflict.”
“What’s going on in the United States is that it’s like one combatant is punching themselves in the face, they’re taxing their own people and the chosen response in this country is that in response to the [American] government taxing their citizens, we’re going to increase the taxes on Canadians in response.”
“So the best course of action is to do nothing. In fact, it might be an excellent opportunity to reduce barriers to trade within this country.”
Leroy says one of the main things this will they or won’t they situation has highlight is how damaging adding an additional tax in the form of tariffs can be. He adds it makes things worse off for both the buyer and seller. If creating wealth is the goal, Leroy says what needs to happen is letting people trade across and within geopolitical boundaries unimpeded.
