Posthaste: Canada is ‘lowering itself’ with retaliatory tariffs that will only bite back, report says

Skip to Content News Archives Economy Energy Oil & Gas Renewables Electric Vehicles Mining Commodities Agriculture Real Estate Mortgages Mortgage Rates Finance Banking Insurance Fintech Cryptocurrency Work Wealth Smart Money Wealth Management Investor Personal Finance Family Finance Retirement Taxes High Net Worth FP Comment Executive Women Puzzmo Newsletters Financial Times Business Essentials More Innovation Information Technology FP500 Podcasts Small Business Lives Told Tails Told Shopping Financial Post Store Obituaries Place a Notice Advertising Advertising With Us Advertising Solutions Postmedia Ad Manager Sponsorship Requests Classifieds Place a Classifieds ad Working Profile Settings My Subscriptions My Offers Newsletters Customer Service FAQ News Economy Energy Mining Real Estate Finance Work Wealth Investor FP Comment Executive Women Puzzmo Newsletters Financial Times Business Essentials This advertisement has not loaded yet, but your article continues below.HomeNewsPosthaste: Canada is 'lowering itself' with retaliatory tariffs that will only bite back, report saysCanadian countermeasures slated to start Sept. 8A banner celebrating Canadian-United States co-operation hangs outside the Canadian embassy in Washington, D.C. Canada announced reciprocal tariffs of 15 per cent to 50 per cent on about $28 billion worth of goods in response to the Trump administration's 50 per cent levies on Canadian imports. Photo by Chip Somodevilla /Getty ImagesTHIS CONTENT IS RESERVED FOR SUBSCRIBERS ONLYSubscribe now to read the latest news in your city and across Canada.Exclusive articles from Barbara Shecter, Joe O'Connor, Gabriel Friedman, and others.Daily content from Financial Times, the world's leading global business publication.Unlimited online access to read articles from Financial Post, National Post and 15 news sites across Canada with one account.National Post ePaper, an electronic replica of the print edition to view on any device, share and comment on.Daily puzzles, including the New York Times Crossword.SUBSCRIBE TO UNLOCK MORE ARTICLESSubscribe now to read the latest news in your city and across Canada.Exclusive articles from Barbara Shecter, Joe O'Connor, Gabriel Friedman and others.Daily content from Financial Times, the world's leading global business publication.Unlimited online access to read articles from Financial Post, National Post and 15 news sites across Canada with one account.National Post ePaper, an electronic replica of the print edition to view on any device, share and comment on.Daily puzzles, including the New York Times Crossword.REGISTER / SIGN IN TO UNLOCK MORE ARTICLESCreate an account or sign in to continue with your reading experience.Access articles from across Canada with one account.Share your thoughts and join the conversation in the comments.Enjoy additional articles per month.Get email updates from your favourite authors.THIS ARTICLE IS FREE TO READ REGISTER TO UNLOCK.Create an account or sign in to continue with your reading experience.Access articles from across Canada with one accountShare your thoughts and join the conversation in the commentsEnjoy additional articles per monthGet email updates from your favourite authorsSign In or Create an AccountCanada will wind up hurting itself with its latest counter-tariffs based on the outcome of retaliatory duties levied nearly 100 years ago, says the Montreal Economic Institute (MEI).Canada is set to unleash on Sept. 8 $28-billion worth of tariffs ranging from 15 per cent to 50 per cent on imports from the United States. The federal government said the goods targeted will mirror the list of Canadian products hit with 50 per cent tariffs imposed by President Donald Trump on Aug. 22 after trade talks between the two sides broke down.Ottawa said the Canadian countermeasures will focus on sectors — including steel, dairy, appliances, agricultural equipment, pulp and paper and electronics — “that are most impacted by U.S. tariffs.”Breaking business news, incisive views, must-reads and market signals. Weekdays by 9 a.m.By signing up you consent to receive the above newsletter from Postmedia Network Inc.A welcome email is on its way. If you don't see it, please check your junk folder.The next issue of Posthaste will soon be in your inbox.We encountered an issue signing you up. Please try againHowever, the MEI doesn’t think much of Canada’s counterpunch.“Lowering ourselves to Trump-style protectionism won’t help us protect free trade,” Vincent Geloso, senior economist at the MEI and author of a report released on Thursday, said in a release.The MEI said retaliatory tariffs will harm Canada in a couple of ways.First, they will increase the cost of imports, resulting in negative economic consequences, including reducing the competitiveness of some exports.They will also slow growth because they will hinder competitive pressure and any possible gains from scale and specialization.Counter-tariffs also encourage interest groups to spend money on lobbying to keep the levies in place, diverting resources away from efforts to improve productivity, which is “a far larger drag” on growth, the MEI said.“Not only are counter-tariffs generally harmful, with major downsides, but the supposed upsides as a policy tool for influencing the trade policies of other nations are tiny, if not nonexistent, for small economies like Canada’s,” it said.As proof, the MEI looked back to the 1930s when the U.S. instituted Smoot-Hawley tariffs. Canada’s government at the time said it would impose retaliatory tariffs and it ultimately did, affecting 30 per cent of exports from the U.S. with the average tariff increasing around 20 per cent.Canada eventually repealed its tariffs and a new Democratic government in the U.S. in 1932 changed trade policy with the Reciprocal Trade Agreements Act.“At no point did the Canadian counter-tariffs have any discernible effect on American trade policy,” the MEI said.Royal Bank of Canada also said retaliatory tariffs will raise prices for Canadians, but there is a “nuance” when it comes to counter-tariffs because Canada imports more of the items on the U.S. hit list than it exports.That means Canadian companies could potentially redirect some of their buys to domestic suppliers, though the more likely outcome is increased costs for companies on both sides of the border since their supply chains are highly integrated.“But there is likely more potential for trade flows to reorient within North America to avoid increased tariff costs with these measures than some of the other sector-specific tariffs imposed to date,” RBC said in a note after trade negotiations ended on Aug. 21.This advertisement has not loaded yet.This advertisement has not loaded yet, but your article continues below.Despite warnings of hardship, Canadians are mostly onside with Prime Minister Mark Carney‘s playbook, with 62 per cent supporting the counter-tariffs, calling them “right under the circumstances,” according to a recent poll by the Angus Reid Institute. Three in four people also backed Carney’s decision to call off talks.Nearly two in 10 said they were very worried or somewhat worried about their jobs given the latest developments on the trade front, but 64 per cent indicated they think Canada will come out stronger from this challenge. Sign up here to get Posthaste delivered straight to your inbox.Canada’s trade surplus sharply narrowed to $769 million in July from $4.2 billion in June, driven by a decrease in gold exports to the United States.Total exports decreased 2.3 per cent in July, the first decline in six months, according to Statistics Canada on Thursday. Exports of metallic and non-metallic mineral products were one of the categories that posted the largest declines — 8.5 per cent — due to lower purchases of Canadian-held gold by foreign residents and lower gold shipments to the United States. — Paula Tran, Financial PostToday’s Data: Canada and U.S. job numbers for AugustEarnings: The Children’s Place, Skechers USA Inc.High income U.S. citizens living in Canada and dual residents beware: two tax court decisions imply that you could face an effective marginal tax rate of more than 57 per cent on any investment income you earn under the U.S. net investment income tax. Read tax expert Jamie Golombek’s column here to find out more.Interested in energy? The subscriber-only FP West: Energy Insider newsletter brings you exclusive reporting and in-depth analysis on one of the country’s most important sectors.Are you worried about having enough for retirement? Do you need to adjust your portfolio? Are you starting out or making a change and wondering how to build wealth? Are you trying to make ends meet? Drop us a line at wealth@postmedia.com with your contact info and the gist of your problem and we’ll find some experts to help you out while writing a Family Finance story about it (we’ll keep your name out of it, of course).McLister on mortgagesWant to learn more about mortgages? Mortgage strategist Robert McLister’s Financial Post column can help navigate the complex sector, from the latest trends to financing opportunities you won’t want to miss. Plus check his mortgage rate page for Canada’s lowest national mortgage rates, updated daily.Financial Post on YouTubeVisit the Financial Post’s YouTube channel for interviews with Canada’s leading experts in business, economics, housing, the energy sector and more.Today’s Posthaste was written by Gigi Suhanic with additional reporting from Financial Post staff and Bloomberg.Have a story idea, pitch, embargoed report, or a suggestion for this newsletter? Email us at posthaste@postmedia.com.Bookmark our website and support our journalism: Don’t miss the business news you need to know — add financialpost.com to your bookmarks and sign up for our newsletters hereNotice for the Postmedia NetworkThis website uses cookies to personalize your content (including ads), and allows us to analyze our traffic. Read more about cookies here. By continuing to use our site, you agree to our Terms of Use and Privacy Policy.