The US has strategically used tariffs with great success over the last decades to get favorable pricing from Canada on everything from energy, softwood, potash, you name it. One item at a time, slowly, methodically they were able to bring down pricing. We have been giving the US extremely good prices, and now, because of Trump he has just flipped the board over and it’s time to restart.
America will be far worse off than before this started, and this has leveled off the playing field again with Canada.
Could you or someone explain this a bit further? You’re saying tariffs were used to bring down prices, but now tariffs are bringing prices back up again? What’s different this time?
Thanks for any help.
(I’m also thrilled for Canada, especially if it means shit in Donald lap.)
I think strategically used tariffs (i.e. used in trade negotiations for specific sectors or items, not unilateral tariffs) can convince a country to export items at a price that benefits one country more than the other, usually in tandem with an agreement to reciprocate. Basically, countries agree to trade at certain rates or exclusively sell. Tariffs are the “bad cop” of trade negotiations.
The tariff isn’t what lowers the price, it’s the threat of the tariff that lowers the price or keeps it stable.
Imagine Canada exports maple widgets at $10 a piece to reflect the true cost of manufacture. The US says that is too high, our people can’t afford that price once it’s on the shelves, so how about you export them for $8? To sweeten the deal, we’ll export freedom widgets to you at reduced cost.
Canada responds saying $8 for maple widgets is too low, $10 is firm and we’ll deal with the current cost of freedom widgets. The US threatens a targeted tariff on maple widgets at 25% which doesn’t affect the price of maple widgets in Canada or their sale price to importers in the US, but importers in the US have to pay $2.50 in tax on top of the purchase cost for maple widgets which drives up the cost for US consumers.
This results in the price of the item increasing in the US $4.50 over the price determined to be “affordable” which will result in reduced imports and reduced purchases of maple widgets by consumers. Canada now has to find somewhere else to sell their maple widgets since the US isn’t buying at the same rate which drives down the value of maple widgets in Canada.
And if the US was feeling particularly vengeful at being denied their cheap steady supply of maple widgets, they could convince other countries to not buy Canadian widgets at all or impose a blanket ban on all Canadian goods (see: how the US obliterated the economy of Cuba because of “communism” which was really just Cuba not wanting to be the US’s sugar plantation anymore).
Canada will evaluate this and determine that selling maple widgets is essential to their economy and less profit for their maple widget industry is an agreeable trade compared to the US not buying at all.
The US has strategically used tariffs with great success over the last decades to get favorable pricing from Canada on everything from energy, softwood, potash, you name it. One item at a time, slowly, methodically they were able to bring down pricing. We have been giving the US extremely good prices, and now, because of Trump he has just flipped the board over and it’s time to restart.
America will be far worse off than before this started, and this has leveled off the playing field again with Canada.
As a Canadian I am thrilled.
Could you or someone explain this a bit further? You’re saying tariffs were used to bring down prices, but now tariffs are bringing prices back up again? What’s different this time?
Thanks for any help.
(I’m also thrilled for Canada, especially if it means shit in Donald lap.)
I think strategically used tariffs (i.e. used in trade negotiations for specific sectors or items, not unilateral tariffs) can convince a country to export items at a price that benefits one country more than the other, usually in tandem with an agreement to reciprocate. Basically, countries agree to trade at certain rates or exclusively sell. Tariffs are the “bad cop” of trade negotiations.
The tariff isn’t what lowers the price, it’s the threat of the tariff that lowers the price or keeps it stable.
Imagine Canada exports maple widgets at $10 a piece to reflect the true cost of manufacture. The US says that is too high, our people can’t afford that price once it’s on the shelves, so how about you export them for $8? To sweeten the deal, we’ll export freedom widgets to you at reduced cost.
Canada responds saying $8 for maple widgets is too low, $10 is firm and we’ll deal with the current cost of freedom widgets. The US threatens a targeted tariff on maple widgets at 25% which doesn’t affect the price of maple widgets in Canada or their sale price to importers in the US, but importers in the US have to pay $2.50 in tax on top of the purchase cost for maple widgets which drives up the cost for US consumers.
This results in the price of the item increasing in the US $4.50 over the price determined to be “affordable” which will result in reduced imports and reduced purchases of maple widgets by consumers. Canada now has to find somewhere else to sell their maple widgets since the US isn’t buying at the same rate which drives down the value of maple widgets in Canada.
And if the US was feeling particularly vengeful at being denied their cheap steady supply of maple widgets, they could convince other countries to not buy Canadian widgets at all or impose a blanket ban on all Canadian goods (see: how the US obliterated the economy of Cuba because of “communism” which was really just Cuba not wanting to be the US’s sugar plantation anymore).
Canada will evaluate this and determine that selling maple widgets is essential to their economy and less profit for their maple widget industry is an agreeable trade compared to the US not buying at all.
Ah, man, thank you for this. I became just a little bit wiser today. Love you.
Oof. I did not know this. That’s scummy af.
Think that’s scummy, take a look at what happened with Haiti when they fought for and gained their independence.
There’s a reason one half of the same island is way worse off than the other when it comes to living conditions for their people.