The Tariff Wars

It is extremely hard to talk about Canadian politics without addressing the tariff wars happening between the US and, well, the rest of the world. I have been following this issue closely, and I am livid. I feel like the Trump administration might be intentionally jeopardizing relations between the two nations for a bigger reward—headlines. Categorically sidelining and undermining Canada by suggesting it merge as the 51st state or overestimating the US’s capabilities to self-sustain is both bizarre and economically irrational. As The Wall Street Journal aptly called it, “The Dumbest Trade War in History,” the tariff threats downplayed the prominence of globalisation.

US crude oil demand depends on 7 million barrels of oil every day from Canada. On the other hand, Canada supplied 80% of its oil to the US in 2023. Let’s consider another prominent industry that thrives on the amicable relationship between the two countries: automotive. An average North American car crosses the border 7–8 times during its production before ultimately being assembled in the US. Tariffs would have a catastrophic effect on this industry. That being said, it’s never the big corporations that take the hit. The taxes trickle down to the end consumers and small companies that are often unable to keep up with rising inflation. Studies have shown the causal effects of higher tariffs imposed by the Trump administration in 2018 on the washing machine industry. The trickle-down effect occurred, and as a result, the prices of washing machines and related products, such as hair dryers, rose significantly—beyond the actual tariffs imposed. Here’s the interesting part: prices rose even for domestic products.

This is as far as the US goes in this story. Let’s focus on Canada now. The damage that can and will be done to Canada might be too hard for its citizens to digest. The Bank of Canada even issued a warning earlier last week, asking Canadians to be mindful when purchasing US products. The Bank of Canada’s findings stipulate that tariffs of this magnitude could reduce Canadian GDP by 3.4% to 4.2% compared to the baseline scenario. This could wipe out approximately $2,000 annually from the average Canadian household’s income. One might argue that, for now, the tariffs have been put on hold for the next 30 days and will likely remain the same way for a while. True, but from a geopolitical standpoint, the US—and, by extension, the Trump administration—must understand that it isn’t just Canada that relies on the US or vice versa. We are reliant on each other.

A closed-off economy might seem beneficial on paper, but the Googles and Coca-Colas of the world were built because of societal advancements driven by globalization. Autarky isn’t the solution, and the worst thing you could do is not be cordial with your neighbours.