Canada and the United States have been maintaining among the largest and most important trade relationships in the global economy, which crosses billions of dollars’ worth of goods and services every day. Tariffs-these taxes applied to imports and exports-have long been contentious among the two countries. Tariffs may restrict protection for a domestic industry, but they can easily turn into trade disputes, economic headache, and poor consumers pay even more than before.
What Are Tariffs and Why Are They Imposed?
Tariffs mean taxes charged on imports and serve to raise the prices of goods for consumers. Tariffs may be imposed for a variety of reasons, among which are to:
- Protect home industry from foreign competition
- Raise revenue for the government
- Retaliation for unfair trade practices
- Addressing matters of national security
While tariffs confer some benefits upon domestic producers because competition is edged out, they usually bring in retaliatory measures that disturb trade relations.
Major Canada-U.S. Tariff Disputes
1.Steel and Aluminum Tariffs
One of the most publicity-grabbing disputes unfolded in 2018, when the U.S. decided to impose a 25% tariff on Canadian steel and a 10% tariff on aluminum, thereby invoking national security as the basis for its decision. In retaliation, Canada imposed tariffs on a large number of U.S. products, such as whiskey, orange juice, and ketchup. In 2019, after months of negotiation, the two parties agreed to lift the tariffs from both sides, with tensions remaining on the issue.
2.Softwood Lumber Dispute
The trade in softwood lumber had a historical relation between Canada and the U.S. from the 1980s. The Americans complain that Canada has unfairly subsidized its lumber industry resulting in repeated tariffs on softwood imports from Canada. The tariffs affect the construction economy of the United States while the Canadian producers suffer tremendous losses. For these reasons, Canada has contested the American tariffs through various trade agreements and international bodies such as the World Trade Organization.
3.Dairy and Agricultural Trade Issues
The United States has repeatedly condemned Canada’s supply management system as it pertains to dairy, poultry, and egg production through quotas and price controls. American farmers argue that this system denies them the opportunity to access the Canadian market. Canada increased access to the dairy market under the United States-Mexico-Canada Agreement (USMCA), but implementation disputes are still ongoing.
Impact of Tariffs on Businesses and Consumers
However, the rock-bottom impact of tariffs on a business and its customers, like any other impacts considered in this document, covers a broad spectrum, including manufacturing, agriculture, retailing, and construction. The following are key impacts:
- Higher Costs: Tariff raises the cost of business, especially with companies that depend on imported materials, which is more often than not passed upon to consumers.
- Downsizing: With reduced market access, industries that are dependent on exports may suffer from layoffs and depressed economies.
- Supply Chain Interruption: Trade barriers will create raw material shortages and production delays.
Future of Canada-U.S. Trade Relations
The Canadian-U.S. trade relations remain vigorous despite unresolved differences and an element of disputes. Conflicts are negotiated, trade instruments like the USMCA are entered into, and mechanisms for resolving disputes are called upon, maintaining some of the more stable economic relations in the world. However, as trade dynamics alter around the world, it will be increasingly pertinent for the two countries to balance their domestic interests with the greater benefits conferred by free trading activity.
Tariffs will continue to be a burning issue, but peace and cooperation will play an integral part in the fair and stable trade relationship between Canada and the United States.
