Government officials and media repeatedly warn that U.S. tariffs on Canadian goods will raise prices and hurt the economy. Yet, they fail to recognize that their own response—retaliatory tariffs—will have the same effect on Canadian consumers. Rather than protecting the economy, counter-tariffs impose higher costs on the bulk of the population, worsening the very problem they claim to address.
Regardless of whether Canada retaliates or not, certain export industries will suffer due to restricted access to the U.S. market. However, responding with tariffs only extends the damage beyond these industries to all Canadians.
Why Do Governments Retaliate with Counter-Tariffs?
1. Political Pressure and Special Interests
Politicians respond to lobbying from domestic industries harmed by U.S. tariffs. Retaliation allows them to appear “strong” despite the economic harm.
2. The Fallacy of Tit-for-Tat “Fairness”
Trade is voluntary exchange, not a battle. Retaliation only inflicts further harm on consumers.
3. Bargaining and Coercion Strategy
Governments use counter-tariffs to pressure the U.S. into reversing its tariffs. However, this rarely works as governments prioritize politics over economic efficiency.
4. Economic Nationalism and Emotional Appeals
Retaliation is often driven by nationalism and public misconceptions about trade, but it ultimately raises prices and reduces overall wealth.
The Better Approach: Unilateral Free Trade
Instead of harming its own citizens with counter-tariffs, Canada should maintain open markets. Free trade benefits consumers by ensuring access to lower-cost, higher-quality goods. If the U.S. chooses protectionism, let Americans bear the consequences while Canadians continue to enjoy the benefits of an open economy.
Conclusion: Retaliation is Political, Not Economic
Counter-tariffs punish Canadian consumers, not the U.S. government. The most sound and principled solution is unilateral free trade, ensuring long-term prosperity despite short-term political pressures.