Editor's Note: This column was co-authored by Scott Hennig.
The United States and Canada have long been the closest of allies. The free flow of commerce and goods is essential to building strong economies and strong relations between the two countries. Yet, President Donald Trump just imposed up to 25 percent tariffs on Canadian goods imported to America, although some were thereafter paused for thirty days.
A shift towards protectionism would harm — not help — President Donald Trump’s efforts to strengthen the economy and keep prices low for American consumers. Tariffs on Canadian goods would also threaten Canadian manufacturing. American economic history — including from the first Trump administration — shows conclusively that the costs of tariffs far outweigh the narrow benefits they provide to protected industries
Lost in the shuffle of a tariff war is the most important group: the people.
Governments want people to think they can make other countries pay for their services by imposing tariffs. But the reality is they can’t.
It’s simple: a tariff imposed by the American government is a tax on American consumers. It will mean higher prices paid by Americans.
A tariff imposed by the Canadian government is a tax on Canadian consumers. It will mean higher prices paid by Canadians.
The new tax will affect Americans who import Canadian oil and gas: “In 2022, Canada was the source of 52 percent of U.S. gross total petroleum imports and 60 percent of gross crude oil imports,” according to U.S. Energy Information Administration.
With more than half of America’s imported oil coming from Canada, a tariff will mean American refineries pay more. In turn, that will increase prices at American gas stations. Either that, or American refineries will go out and buy more oil from Saudi Arabia, Iraq and Columbia — likely also with higher costs.
An American tariff on Canadian imports will make all aspects of life in the U.S. more expensive – from the iron, steel and machinery required for U.S. manufacturing, to cars, fertilizer, wood, electronics and furniture.
To see how free trade reduces costs for all involved, consider the case of a hamburger.
The bun is baked in California, with flour from Saskatchewan. The beef is from cattle born in Alberta, raised in Nebraska and processed in Colorado. The bacon is from pigs raised in Manitoba and processed in Iowa. The lettuce is from Arizona, the tomatoes from Ontario and the ketchup from Ohio.
If governments disrupt this free flow of goods between our two countries, businesses will pay more to make these burgers, and consumers will pay more to eat them.
“Tariffs are simply taxes,” Republican Senator Rand Paul said. “Taxing trade will mean less trade and higher prices.”
The Budget Lab at Yale University estimates that tariffs Trump has threatened for Canada, Mexico and China would cost the average American household $1,000 to $1,200 annually (Trump has since added an additional 10 percent tariff on Chinese goods, meaning that the damage will actually be greater than that estimate suggests).
And it’s not just consumers who pay the price of a tariff war. Workers do too.
Workers in the U.S. manufacturing industry were hit hard by the last round of tariffs. “Steel and aluminum tariffs…created a few metals-producers’ jobs — 1,000 in steel and 1,300 in aluminum,” wrote Phil Gramm and Donald J. Boudreaux, but “destroyed about 75,000 manufacturing jobs.”
That’s more than 32 Americans losing their job for every new job created.
The Tax Foundation also shows how import tariffs hurt everyday workers. It estimates that tariffs already imposed under Trump and President Joe Biden will reduce “employment by 142,000 full-time equivalent jobs” and mean an “average annual tax increase on U.S. households of $625.” These bleak numbers will only get worse as new tariffs go into effect.
The tariff war will also bring pain for Canadians. Trump’s new tariffs will blow a $160-billion hole in Canada’s economy and lead to 600,000 fewer jobs. What would make the pain worse? Retaliating with tariffs — which is exactly what Canadian officials are already promising to do.
American tariffs of 25 percent would cost each Canadian $1,300, according to the Canadian Chamber of Commerce. If Canada retaliates, that cost jumps to $1,900 per Canadian.
That should make things clear: When the American government imposes tariffs that hurt its citizens, retaliatory tariffs from the Canadian government will only make the pain worse. Two wrongs don’t make a right.
Those who want more government control in Washington and Ottawa will have a field day pushing for tariffs. They will want to shut down trade and use taxpayer money to subsidize industry and businesses that can’t stand on their own two feet.
Lost in the crossfire are the ordinary Americans and Canadians who will be forced to pick up the tab through higher prices and bigger tax bills.
David Williams is the president of the Taxpayers Protection Alliance. Scott Hennig is the president and CEO of the Canadian Taxpayers Federation.
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