A trade war between Canada and the United States that keeps ratcheting up will only lead to more pain for everyday Canadians.

When President Donald Trump imposes tariffs on Canadian goods going into the United States, it makes those goods more expensive for Americans. And every time Canadian politicians decide to slap tariffs on American goods coming into Canada as a response, life becomes more unaffordable for Canadians.

That’s because tariffs are taxes imposed on domestic consumers. They are not, contrary to messaging coming out of the White House, taxes paid for by foreign countries.

Of course, Canadians want to see their leaders respond when Trump imposes tariffs on Canadian goods being sold to the United States. Trump’s tariffs are poised to cause Canada’s GDP to contract by between 2.5 and 3 per cent this year, which will surely cause a recession.

But hitting back with tariffs of our own only increases the pain being felt by Canadian consumers and will only deepen the recession Canadians are staring down this year.

Australia’s political leaders seem to have figured this out. Their government is choosing not to respond in kind to Trump’s tariffs on Australian steel and aluminium.

“Tariffs and escalating trade tensions are a form of economic self-harm and a recipe for slower growth and higher inflation,” said Australian Prime Minister Anthony Albanese. “They are paid for by consumers. This is why Australia will not be imposing reciprocal tariffs on the United States.”

How, then, should Canada respond to Trump’s tariffs? Here are just two of many solutions: tearing down internal trade barriers and unleashing Canadian energy.

Many Canadians would be stunned to know that Canada has trade barriers between our provinces that are nearly as high as the tariffs Trump imposed on Canada earlier this month.

That’s right: because of roughly 400 carve-outs to Canada’s internal free trade deal, goods being traded from one province to another face the equivalent of a 21 per cent tariff on average.

Canadians are rightly indignant at the tariffs the U.S. administration has imposed on Canada. But Canadians should also be angry at our provincial governments, which have created a system of internal trade barriers that, prior to the current trade war, made it easier to trade with the U.S. than within Canada.

That must change.

Nova Scotia Premier Tim Houston is leading the way on this file and has pledged to remove Nova Scotia’s barriers to trade with any other province that will reciprocate. And the federal government has sent signals that the provinces appear willing to move quickly to tear down internal trade barriers given the circumstances.

Canada’s provinces must agree to tear down all internal trade barriers as quickly as possible. The boon this would be for the national economy would virtually offset the impact of the Trump tariffs.

The federal government must also stop shooting the Canadian economy in the foot by blockading crucial energy projects that represent the key to diversifying our international trade.

Since the Liberals came to power in 2015, they have blocked more than $670 billion worth of energy projects that would have sent western Canadian oil, natural gas, and petroleum products to eastern Canada, Europe, and Asia. 

Canada should be an energy superpower, but for the past decade the feds have stood in the way.

It’s time to get energy projects built and allow our energy to power the world. Right now, most of our energy exports go to the United States. With better pipeline infrastructure, Canada can diversify and send more oil and natural gas to Europe and Asia, two regions desperate to get more clean and ethical Canadian energy.

Under the Trudeau government, countries from Europe and Asia begged the feds to develop more Canadian energy and export it to the world. Former prime minister Justin Trudeau told them there was no business case.

That sentiment was wrong then and it’s even more wrong now. It’s time to build pipelines and sell Canadian energy to the rest of the world. Pronto.

Canada should respond to U.S. tariffs by making our economy more self-reliant and by exporting more of our key products to new markets.

The Trump tariff threat will be present for the next four years. Slapping more taxes on Canadians isn’t a long-term solution. Diversifying our economy is.

Originally published here