Wednesday, August 26, 2026

Does Canada have any alternatives to retaliatory tariffs?

As Canada invokes dollar-for-dollar retaliatory tariffs on the USA, one can't help but lament how Canada is getting dragged into Trump's own silliness. On both sides of the border, prices will go up, plants will close, and jobs will be lost. As one journalist put it, this is "fighting stupid with stupid". Protesting that "we didn't start it" doesn't change that.

I mean, think about it: Canada now has tariffs on the same exports to the US as the US has tariffs on its exports to Canada. How daft is that? We may as well just keep those products and use them here in Canada, rather than making them more expensive, exporting them to the USA, and then importing the same products back again from the USA (after they have made them more expensive). Franz Kafka would have had a field day with this stuff.

There again, what choice do we have? Doing nothing would signal surrender, and give Trump carte blanche to extend or ramp up his tariffs. Hardly anyone is advocating that.

Some - including the Alberta Federation of Labour, much to many people's surprise - have suggested levying export taxes on our exports to the US. After all, that would put the financial burden on American importers, not Canadian exporters, right? The problem is, export  taxes raise the prices for importers, who would probably then look eslewhere for their imports. It would reduce the attractiveness of, and demand for, Canadian products, and probably result in scaled-back production and job layoffs. 

Predictably, others - the Canadian Association of Petroleum Producers, for one - have strongly counselled against such a move. Oh, and export taxes are also explicitly prohibited under the CUSMA/USCMA agreement with the US (although, arguably, Trump has flouted the spirit if not the letter of that agreement many times).

Which leaves us with retaliatory tariffs, or some other non-tariff option. BC Premier David Eby has called on Mr. Carney to consider other strategies, like reconsidering the plan to buy American F-35 fighter jets, and to levy export taxes on exports of coal to the US, but only in adddition to retaliatory tariffs, which he says he fully supports.

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