As the United States reimposes tariffs on some Canadian aluminum imports and Canada prepares to hit back, experts say the dispute will make certain products more expensive for Canadians — but it’s not yet clear how awful the pain will be or how long it will last.
However, experts agree that reinstating the tariffs during the ongoing coronavirus pandemic won’t help businesses already reeling from the economic impact of the global spread of COVID-19.
“The pandemic, unfortunately, is not yet in our rear-view mirror,” said Scotty Greenwood, CEO of the Canadian-American Business Council.
“You’ve got the humanitarian and the health crisis, you’ve got the economic calamity that’s coming. And so this doesn’t help … making things more expensive, making it more difficult to source products.”
Tariffs are essentially a tax that a country places on imported products. The restored 10 per cent tariff on unwrought, unalloyed aluminum imported into the U.S. from Canada is expected to come into effect on Aug. 16.
The U.S. tariffs by themselves will hurt Canadian aluminum producers but they’re not expected to have a direct impact on consumers because the average Canadian isn’t consuming raw aluminum “in a direct sort of way,” according to Concordia University economics professor Moshe Lander.
Rather, it’s the $3.6 billion in retaliatory tariffs that Canada has pledged to slap on the U.S. that will cause the most pain to Canadians, experts say. Canada on Friday released a draft list of aluminum products and products containing aluminum that it wants to subject to reciprocal 10 per cent tariffs.
The list includes a menu of straight aluminum materials, but also consumer goods like refrigerators, “household or laundry-type” washing machines and sporting equipment like bicycles, golf clubs, baseball bats, hockey sticks and playground equipment.
“What it means is … those goods are now going to be 10 per cent more expensive,” said Mark Agnew, senior director of international policy at the Canadian Chamber of Commerce.”
Agnew said companies might respond to this in a few ways. They might take a hit to their bottom line, they might ask their suppliers to take a hit, or they might pass the cost down to consumers, he said.
“Because everyone’s pockets are getting already squeezed due to COVID-19, you’re taking that problem and you’re compounding it with another 10 per cent surtax, the same time.”
Greenwood echoed that sentiment, arguing manufacturers and consumers will see prices go up when economic activity has already contracted significantly due to the pandemic.
“The border is already closed to people going back and forth. We’re keeping it open for essential commerce but we’re going to make that commerce more expensive,” said Greenwood.
David Soberman, professor of marketing at the Rotman School of Management at the University of Toronto, said imposing tariffs like these are “never really a good idea” but are “even worse” during a global pandemic when companies need help staying afloat.
“The minute that you create an artificial increase in costs for your manufacturers, the first thing you do is you make it harder for them to compete and harder for them to survive,” Soberman said.
Jean Simard, president and CEO of the Aluminum Association of Canada told Global News there will be a “relative impact” on the industry’s smelters across Canada, which employ about 9,000 people.
“It adds complexity to an already precarious business environment, but it will not impact production per se,” Simard said.
Tariffs may not last long, experts say
In the long-term, however, Lander and Soberman suggested Canadians might not end up feeling the impact of the reimposed tariffs “very strongly” because of the upcoming U.S. election in November.
“This is, I think, really what I would call symbolic gestures by the current administration to make themselves look tough, as opposed to something which is going to have a long-term effect on the trade relationship between Canada and the United States,” Soberman said.
Lander, too, said he doesn’t think this dispute will evolve into a “long-lasting trade war,” regardless of who is in the White House next term.
A Democratic president would likely quickly repeal the aluminum tariffs and a re-elected Trump would probably withdraw them as well, he said.
“Unless he has eyes on dictatorship … there’s nothing gained by continuing at that point once he’s won,” he said.
Lander said he has one message for consumers as the tariff dispute unfolds.
“Stay calm.”