08/29/2026
This is a post that neither defends the US or CDN policies, or the politics of the current administration on either side of the border.
This is not an “us vs them” issue even though it has been made to be in the media and the political rhetoric.
Tariffs are a surtax on goods imported from other countries. The logical premise is that the more expensive goods manufactured domestically are priced out of the market by cheaper imported goods, produced at a lower cost. Tariffs are a false equalizer in the market, creating an extra “input cost” into the price paid by the consumer. The price is therefore increased to the point where the cost of the domestic good is similar to the cheaper, imported good.
Adding a tariff is a cost borne by the consumer. A US tariff increases costs to the US consumer, a Canadian tariff increases costs to the Canadian consumer. In a tariff war, the bullets are taxes and the casualties are the consumers and inflated prices.
Just like a real war, the politicians rattle their sabres in front of the camera but pay no price for the dead bodies resulting from their decisions. The dead bodies are in the form of layoffs, closed businesses, and lower consumer sentiment.
Who hurts more in a trade war?
Between Canada and the United States, there is a certain level of asymmetry between the two countries. The US economy is 10 X the size of the Canadian economy with roughly 9 X the population.
But it’s not just that the US economy is the same as the Canadian economy at scale. Where the Canadian economy never developed as fully, the American economy benefits from a myriad of points:
1- American companies can freely sell their goods and services across the entire country, whereas Canadian companies face interprovincial trade barriers that are estimated to restrain Canada’s GDP by $200 Billion.
2- the US dollar has been the settlement standard for over a century for financial and resource trade. This has created an unusual demand for US Treasuries which has created massive liquidity in the US domestic market.
3- the Canadian capital markets are a fraction of the US capital markets. The US stock markets are 18 X of the Canadian markets. There is broad access to venture capital, private equity, institutional capital and secondary markets.
4- the US has an exceptional innovation and commercialization ecosystem. Where Canada produces excellent scientists, engineers and universities, America produces. Canada’s ability to produce talent translates into brain drain to seek better opportunities south of the border.
5- real GDP per capita puts more capital and corresponding spending behind each worker. The US GDP per capita sits at roughly $73,000 whereas Canada’s GDP sits at roughly $52,000. Canada’s GDP per capita has been stuck at this level since 2015, but importantly it puts a 41% advantage to the US. The OECD has specifically identified Canada’s relatively weak productivity and low capital stock per worker as major economic problems.
6- Canada’s economy is in banking, utilities and resources. America’s economy is all of that plus intellectual property. People buy brands such as Apple, Microsoft and Ford. Most major corporate headquarters are based in the US.
Even major Canadian retailers are US subsidiaries or owned by foreign (including China) companies. Brookfield, Tim Hortons and others are all headquartered in America.
7- population and innovation clusters.
New York is the banking and capital central, far superior to Toronto.
San Fransisco, Seattle and Austin are all capitals of technology compared to Ottawa.
Boston has biotech, whereas we really don’t.
Vancouver’s entertainment industry pales compared to Los Angeles.
Simply put, the American economy produces under a tax system designed to produce wealth. The Canadian tax system punishes savings and capital.
Will Canadian tariffs hurt American consumers? No quite the opposite. Canadian import tariffs hurt Canadian consumers because it’s a cost embedded in the products we all buy.
As much as we would like to think there is an equivalent “eye for an eye” retribution in handing American companies a tariff, the reality is we are a bird on an alligator in respect of impact overall.
I’m not suggesting that it may feel good to stick to to someone making life a bit more difficult but the effects are minimal and more asymmetrical to the Canadian consumer.
Notwithstanding the issue of prices, many businesses with American corporate parents are simply winding down Canadian operations so the amount of unemployment in this country has all likelihood of ticking up.
Again, I’m not suggesting that counter tariffs are the right or wrong move, it’s just that actions have intended consequences and unintended consequences.
