OTTAWA—It is a basic tenet of Tariffs 101, and an essential argument in Canada’s fight against Donald Trump’s 25-per-cent tariff threat: that consumers and businesses on your home turf are the ones who pay the cost of tariffs, or counter-tariffs, not the other country’s government or people.
So it was baffling to see Chrystia Freeland, the former finance minister vying for the Liberal leader’s and prime minister’s job, write in the Star that “Americans will pay” the tough Canadian counter-tariffs she called for against U.S. imports.
In an op-ed that staked out a strong nationalist stance, Freeland wrote that if Trump imposes 25-per-cent tariffs, as he threatens to, on all Canadian shipments into the U.S., Canada must retaliate, and hard.
“Being smart means retaliating where it hurts,” she said. “Our counterpunch must be dollar-for-dollar — and it must be precisely and painfully targeted.”
Freeland cited politically sensitive U.S. imports, and warned “Florida orange growers, Michigan dishwasher manufacturers and Wisconsin dairy farmers: brace yourselves.”
Those goods could be subject to Canadian counter-tariffs, but unlike what Freeland suggested, that would mean higher prices paid by Canadian customers of the U.S. products.
“If we are forced to retaliate, the $150 billion that Americans will pay to sell their goods to Canada is $150 billion we could use to help Canadians and businesses weather this essential fight,” Freeland wrote.
That’s the problematic part.
In fact, as the Canadian government has repeatedly said in speeches and on its websites, tariffs are a tax on imported goods, paid by the person or company that imports them.
“Many importers pass these costs down to consumers by charging higher prices. While tariffs are collected by the government that imposes them, tariffs aren’t paid by one government to another,” says an Export Development Corporation explainer for Canadian businesses.
Prime Minister Justin Trudeau stressed the same point Friday, saying first and foremost, Canada does not want to see any tariffs on either side of the border to avoid “extra costs on consumers in Canada and the United States.”
In her op-ed, Freeland correctly said tariffs “work both ways.”
She said just as Trump “intends to fill America’s coffers with tariff revenues,” Canada “can do the same,” suggesting that Canada could re-distribute the revenue generated by counter-tariffs to workers hard hit by a tariff war.
In that, Freeland appeared to adopt Trump’s logic — that Canadian lawmakers have said is fundamentally flawed because it ignores the fact the cost is borne by ordinary consumers, households and businesses. Any redistribution would be of the monies collected from Canadians.
Asked to explain on Friday, one source on Freeland’s team, speaking to provide background only, suggested that her essay is rhetorically correct.
Based on the latest trade data, the source said, trade each way is around $600 billion annually, and a 25-per-cent tariff would raise $150 billion in revenue, and that her point is: “If they impose tariffs, and we retaliate, both sides are paying tariffs.”
Yet, as a former journalist and skilled writer, not to mention as the former minister who led Canada’s charge against Trump’s 2018 steel-and-aluminum tariffs, Freeland probably knows the difference between rhetoric and reality.
