fbpx

Tariffs bad

Introduction

A tariff is a tax imposed by a government on imported or exported goods, designed to influence trade by making foreign products more expensive. While tariffs are often justified as a way to protect domestic industries or generate revenue, they frequently result in higher costs for consumers and strained international relationships. Currently, the United States and Canada face a significant tariff threat following President-elect Donald Trump’s announcement of a 25% tariff on all imports from Canada. This policy, aimed at addressing issues such as immigration and budget deficits, poses a risk of economic retaliation and could harm both economies, leaving consumers and businesses in both countries worse off.

Tariffs Explainer

What is a tariff?

A tariff is a tax imposed by a government on the import and/or export of goods, or goods that they send abroad or that other countries send to them. They can either be variable (set based on the price of the good) or fixed (a regular tax based on a unit amount). Governments usually appeal to tariffs to address what they think is unfair trade and competition from other countries out of the mistaken belief that exports must count for more than imports in terms of the wealth of a nation (when imports are the thing that ordinary consumers get to enjoy as finished goods), or as a political tactic, citing their ability to “boost production” and “revitalize” specific industries.  

Like most taxes, tariffs are acts of force. Home states demand a certain amount of money from consumers and other countries in the form of either a percentage value (in the case of variable tariffs) or based on the volume/quantity of the items in question (for the more fixed varieties). In other words, they are either ad valorem or volume-based taxes.

Authorities introduce tariffs following the usual incentive logic for taxes. Taxes are supposed to make one activity or good costlier, so consumers are discouraged from doing that thing over another. In the case of tariffs, consumers are discouraged from buying foreign goods and are instead encouraged to buy locally. 

However, just like with other taxes, such measures introduce what economists would dryly call “deadweight loss” – a technical term for a loss in overall well-being for consumers who cannot afford or will not exchange money for goods they would have enjoyed otherwise, and producers, who do not produce as much as they would have under normal conditions. Both lose out on economic opportunities in the process.

In November 2024, President-elect Donald Trump announced he would impose tariffs on Canada, Mexico, and China. Trump announced on Truth Social that “as one of my many first Executive Orders, I will sign all necessary documents to charge Mexico and Canada a 25% Tariff on ALL products coming into the United States”. 

There are multiple reasons cited for this policy:  stopping the so-called “invasion” of drugs, particularly fentanyl, through the borders of Canada and Mexico, curbing illegal immigration coming from the two countries, generating more revenue for the US federal government and covering the estimated $710 billion budget deficit

However, public analysts like Canadian economist Trevor Tombe predict that “if the U.S. follows through on this threat and Canada retaliates, both economies would take a significant hit…the economic cost for Canadians would be around CAD 1,900 per person annually. In the U.S., the impact would be nearly as large, about CAD 1,700 (around $1,184 USD) per person.” As long-time allies, Canada and the United States could easily have settled immigration or policing drug crime diplomatically and without putting the fragile economies of both countries at further peril. 

And those are conservative estimates. It could be much worse based on several factors, such as a general economic slowdown. The same economist predicts that approximately 2.4 million Canadian jobs could be subject to U.S. tariffs, affecting the livelihoods of everyday people in a profoundly personal way.

Although the country imposing the tariff may claim that doing so is helping its economy and consumers, that could not be further from the truth. 

For one, protectionists neglect to consider the fundamental economic truth that collaboration enables us to do more things than we could ever do in isolation, allowing us to prosper the way we do in the modern world. 

Imagine going fully independent and sewing your clothes, building your own car, or putting together your own smartphone or laptop. Not only are some things just impossible to do on your own because they require materials and know-how that are only available elsewhere (like laptops and smartphones), but the clothes or cars you do manage to build will be far worse than what an expert carmaker or laptop company could ever do. The same applies to countries that decide to go protectionist and impose tariffs – there will be fewer, more expensive, and poorer quality items than other countries could have provided. 

Protectionists also neglect how there are no pure “national” and pure “foreign” companies in the real world. Firms in Canada and the US do collaborate with outside partners to be able to ply their trade. As such, local companies will find it harder to operate, innovate, or even start if they have to deal with extra duties. 

Consumers never benefit from tariffs. They only suffer financially and in their daily lives. Tariffs allow politicians to win shallow political victories while disregarding the harm they cause to their own people and the people of the country they impose the tariff on, particularly people experiencing poverty. 

While tariffs might work in some way as a bargaining chip in political squabbles, they actually mean that the prices of products like groceries, clothing, alcohol, and products needed to construct homes and other essentials go up in a way that makes them unaffordable to everyday people as well as those providing services that can alleviate affordability challenges. 

The cost of buying a home goes up even more when the lumber used is now further taxed. Still, the country imposing the tariff also suffers because their industries have to adjust to not selling as much lumber as they usually do. They will additionally suffer from retaliatory tariff measures that inevitably occur. Tariffs lead to trade wars, which always lead to a harder life for consumers in both countries.

Tariffs may look like a way to punish other countries, but they are only a means to punish one’s consumers. When a tariff on imported goods is imposed, that cost is passed on to the country’s consumer that is imposing the tariff. They have to pay more to buy that product since the producer will raise the price of their goods to make a reasonable profit from its sale. 

Therefore, the claim that it will help domestically does not extend to the consumer either since they are paying the price and are, thus, unable to use that excess money to buy other things, rendering them poorer overall. Economists have noted that tariffs particularly burden the poorest in society. 

Such taxes should not be used as a policy tool, as they affect consumers and businesses already struggling due to cost-of-living crises and rising product costs.

In a tweet on January 03, 2025, Trump suggested, based on past US history, that tariffs could be the primary source of revenue for the American government and pay off its debt.

https://x.com/realDonaldTrump/status/1875049777186136481

Regardless of tariffs’ historical importance (though that has not been positive either – see the previous question), it would be impossible to fund today’s United States primarily via tariffs from Canada and/or the world itself. Estimates by the Tax Foundation on the potential revenue from Trump’s proposal show how an ambitious 10 percent universal tariff would only raise $2.7 trillion over ten years, from 2025 to 2035, with a 20 percent universal tariff generating $4.5 trillion over the same time. Taxes on Canadian-American trade would fall far short of that since Americans only spent $481 billion on imports from Canada, according to the latest full figures from 2023. By contrast, income taxes bring in $2.2 trillion each year

It is worth mentioning that even such estimates are optimistic because they assume the US economic pie will remain unchanged once the Trump Administration imposes new tariffs. Yet, as we have shown in our answers to previous questions in the FAQ, tariffs would leave consumers and businesses worse off. From a fiscal perspective, because tariffs are designed to reduce spending on imported goods, they lead to fewer actual imports, resulting in less revenue for the federal authorities. 

Any notion of funding the federal government out of tariffs consequently remains wishful thinking, especially without committing to cutting spending.

What are the tarrifs?

Trade War Store

When a trade war commences, tariffs are slapped on products, barriers to imports and exports are implemented, and costs rise for ordinary consumers.

Use the Consumer Choice Center’s Trade War Store to compare prices of products once tariffs are introduced.

Glacier Bay Pemberton Toilet

$189
$ 236
25
  • PRICE ADJUSTMENT: To all prospective buyers, due to retaliatory tariffs from the Trudeau transition government in Canada, customers in Canada will be charged a 25% tariff.

Tropicana 100% Orange Juice

$7.78
$ 9
725
  • PRICE ADJUSTMENT: To all prospective buyers, due to retaliatory tariffs from the Trudeau transition government in Canada, customers in Canada will be charged a 25% tariff.

Grissol Croutons Garlic & Herb

$2.48
$ 3
10
  • PRICE ADJUSTMENT: To all prospective buyers, due to retaliatory tariffs from the Trudeau transition government in Canada, customers in Canada will be charged a 25% tariff.

Grissol Croutons Garlic & Herb

$5.27
$ 6
59 CAD
  • PRICE ADJUSTMENT: To all prospective buyers, due to retaliatory tariffs from the Trudeau transition government in Canada, customers in Canada will be charged a 25% tariff.

2024 Ford Edge (starting SE Model)

$38.465
$ 48,081
  • PRICE ADJUSTMENT: To all prospective buyers, due to retaliatory tariffs from the Trudeau transition government in Canada, customers in Canada will be charged a 25% tariff.

Novolin Insulin

$60.25
$ 75
31
  • PRICE ADJUSTMENT: To all prospective buyers, due to retaliatory tariffs from the Trudeau transition government in Canada, customers in Canada will be charged a 25% tariff.

LEGO Friends Pet Adoption Set

$50.99
$ 63
74
  • PRICE ADJUSTMENT: To all prospective buyers, due to retaliatory tariffs from the Trudeau transition government in Canada, customers in Canada will be charged a 25% tariff.

Energizer AA Batteries

$24.97
$ 31
21
  • PRICE ADJUSTMENT: To all prospective buyers, due to retaliatory tariffs from the Trudeau transition government in Canada, customers in Canada will be charged a 25% tariff.

Share on social media

Media Hits

en_USEN

Follow us

WASHINGTON

712 H St NE PMB 94982
Washington, DC 20002

BRUSSELS

Rond Point Schuman 6, Box 5 Brussels, 1040, Belgium

LONDON

Golden Cross House, 8 Duncannon Street
London, WC2N 4JF, UK

KUALA LUMPUR

Block D, Platinum Sentral, Jalan Stesen Sentral 2, Level 3 - 5 Kuala Lumpur, 50470, Malaysia

© COPYRIGHT 2025, CONSUMER CHOICE CENTER

Also from the Consumer Choice Center: ConsumerChamps.EU | FreeTrade4us.org