Trump's tariff plan is highway robbery
Yesterday, President Trump announced he will add a border adjusted tariff of between 3% and 24% on Canadian softwood lumber. The reasoning behind this tariff is an attempt to counter Canada's tariff on American dairy products. Neither tariff is illegal, because they are both exempt from NAFTA, but Trump's policy misses the mark.
The dairy industry in Canada is run more like a cartel, and their lobby has an inexplicable strong influence on the politicians in Ottawa. As a result, Canadians pay a bloated price for dairy products. The tariff on American dairy is added to curb competition from the US and try to keep dairy industry jobs in Canada. I for one, would like to see healthy competition, from the US here in Canada. Canadians would benefit from cheaper dairy prices and artificially propping up a failing industry is not an effective solution to job loss.
What Trump doesn't seem to understand is that the dairy industry has nothing to do with the lumber industry. The Canadian lumber industry is much larger than the American, and 80% of Canadian lumber is exported to the US where it is used mostly in home construction. A border adjusted tax on softwood lumber will not curb demand for Canadian lumber because the American lumber industry cannot keep up with the demand. This will lead to a spike in prices of American lumber at the sudden increase of demand and many contractors will resort to buying Canadian lumber anyway. So while American distributes will take their cut, the government will get their cut and the American home buyer will bear the increase in construction costs.
Trump has also made claims of levying a border adjusted tariff on goods imported from Mexico, China and Viet Nam. Tariffs only work when your nation is in competition in the same industry as the countries the tariff is direct towards. There was a time when the US net export was larger than their import to every country it traded with, (except Canada) but that is no longer the case. The US now has a net export deficit with every country it trades. Now, the US's most valuable exports are intellectual property, of which the whole world benefits. The US no longer competes with Mexico, China, etc..in manufacturing industries that it once dominated.
In short, Canada's dairy tariff hurts both Canadians, by propping up a failing industry, and Americans in the dairy producing Mid-West by significantly decreasing their export market. While American home buyers will suffer the most from the lumber tariff. There was a time when tariffs could save a dying industry, but the industries Trump wishes to save cannot compete at today's labour prices, which are at an all time high in the US. As a result, American consumers will pay for these tax increases while doing little to curb demand of foreign goods. This is highway robbery.
The dairy industry in Canada is run more like a cartel, and their lobby has an inexplicable strong influence on the politicians in Ottawa. As a result, Canadians pay a bloated price for dairy products. The tariff on American dairy is added to curb competition from the US and try to keep dairy industry jobs in Canada. I for one, would like to see healthy competition, from the US here in Canada. Canadians would benefit from cheaper dairy prices and artificially propping up a failing industry is not an effective solution to job loss.
What Trump doesn't seem to understand is that the dairy industry has nothing to do with the lumber industry. The Canadian lumber industry is much larger than the American, and 80% of Canadian lumber is exported to the US where it is used mostly in home construction. A border adjusted tax on softwood lumber will not curb demand for Canadian lumber because the American lumber industry cannot keep up with the demand. This will lead to a spike in prices of American lumber at the sudden increase of demand and many contractors will resort to buying Canadian lumber anyway. So while American distributes will take their cut, the government will get their cut and the American home buyer will bear the increase in construction costs.
Trump has also made claims of levying a border adjusted tariff on goods imported from Mexico, China and Viet Nam. Tariffs only work when your nation is in competition in the same industry as the countries the tariff is direct towards. There was a time when the US net export was larger than their import to every country it traded with, (except Canada) but that is no longer the case. The US now has a net export deficit with every country it trades. Now, the US's most valuable exports are intellectual property, of which the whole world benefits. The US no longer competes with Mexico, China, etc..in manufacturing industries that it once dominated.
In short, Canada's dairy tariff hurts both Canadians, by propping up a failing industry, and Americans in the dairy producing Mid-West by significantly decreasing their export market. While American home buyers will suffer the most from the lumber tariff. There was a time when tariffs could save a dying industry, but the industries Trump wishes to save cannot compete at today's labour prices, which are at an all time high in the US. As a result, American consumers will pay for these tax increases while doing little to curb demand of foreign goods. This is highway robbery.
