These extreme measures have shocked Canada’s economy, with so much uncertainty about the future, which has led to job losses in the automotive industry and a downturn in the real estate market. In response, Canada has imposed retaliatory tariffs and is working to build better trade relations with other countries to ease our dependence with Prime Minister Mark Carney, noting that, to the best of our knowledge, the Canadian-U.S. trade relations are “overall.”
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But what is the exact tariff?
Treat tariffs as cover fees at the event. Countries basically charge registration fees for things from other countries. So if the U.S. imports cars from Canada and meets tariffs, the U.S. charges an additional fee to the border before putting the goods in. This increased cost is often passed on to consumers.
Tariffs are designed to “protect domestic businesses” – in other words, the government wants you to buy goods made in your country, but when the government’s emergency taxes (as Trump has done recently), the cost of goods must also increase to protect profit margins and make foreign products more expensive. People who buy products are the fees people pay for tariffs, and these suppliers feel the impact of lack of competitive pricing.
Obviously, some things are really great, but when tariffs are imposed on everyday necessities like aluminum and metal, there is real trouble (think cars, laptops, cell phones, construction, tools and medical equipment). That was when the trade war began, and in the next few years, the consequences were immediately felt. Something that future generations will learn in history classes.
Speaking of history, when was the last thing that happened between the United States and Canada? Donald Drummond, former chief economist at TD Bank, is a researcher and an adjunct professor at Queen’s School of Policy Studies, and lives at the CD Howe Institute, which brought back nearly a century to the Smoot-Hawley Tariff Tariff Act of the 1930s, where U.S. law raised tariffs on more than 20,000 items.
“They are taller and more common than steel and aluminum,” he said. “Before that was the 1890s. This was the third time in the last 130 years in Canada-U.S. The end of the 1890s and 1930s was very bad, not only for the world and for Canada, but for the end of the United States.”
“They failed to achieve their goals and eventually eliminated tariffs in both cases,” Drummond explained. “Especially in the U.S. cases in the 1930s, it was very obvious that they completely changed their policy thrust after a while.” The 1930s reflected the recent incidents of higher tariffs in the United States, leading to retaliation in other countries. In the economic literature, this is what is called a spider-web diagram, which illustrates every round of retaliation: the United States raises tariffs, the reactions of others, and the cycle continues.
Basically, global trade collapsed, the Great Depression worsened, and policies backfired. “It seems very, very familiar,” Drummond said.
