Canada Implements Retaliatory Tariffs on U.S. Goods Amid Trade Dispute
The Tariff War Across the 49th Parallel Is a Conspiracy Against the Public
By taxing each other’s goods up to 50%, the United States and Canada sacrifice the labouring poor on both sides of the border to the vanity and clamour of favoured producers.
The present quarrel between the United States and Canada is being fought, not with muskets along a frontier, but with duties at the customs house. The chief magistrate of the United States has imposed tariffs as high as 50% on a range of Canadian goods—dairy, alcohol, even the humble hockey stick and the luxurious perfume. The Canadian government replies in kind, with “dollar‑for‑dollar” tariffs between 15% and 50% on some $20bn of American imports, from steel and appliances to agricultural equipment and electronics. Each ministry assures its own public that it is defending national honour. Each in reality is shrinking the market which sustains the prosperity of both.
When I wrote of the division of labour in *The Wealth of Nations*, I observed that its wonders in the pin‑workshop depend upon the “extent of the market.” A merchant who may freely sell to ten cities can more finely divide tasks than one confined to a single town; his workers acquire greater dexterity, invention is encouraged, and machines are profitably employed. A tariff is thus not merely a tax; it is a wall built across the market. When two great neighbouring nations erect such walls against each other, they do not enlarge their own field of employment; they partition and diminish what was once common and ample.
The first and most obvious effect is on prices. A hockey stick taxed at 50% does not merely punish the Canadian artisan; it is paid for by the American child—or by his parents, who must then forego some other comfort. Steel and appliances, loaded with duty as they cross into Canada, become dearer to Canadian builders and households; a cost not trumpeted in any speech, but quietly extracted at the till. The benefits, by contrast, are loudly celebrated and narrowly enjoyed: a favoured factory preserved from foreign rivalry, a domestic interest “protected.” Here the rule holds which I long ago observed: in trade policy, the visible gains are concentrated, the unseen losses are scattered among multitudes.
It is therefore prudent to regard with the most suspicious attention every petition of merchants and manufacturers for such protection. People of the same trade seldom assemble—even now—without contriving some means to raise prices or exclude rivals; and when they persuade the magistrate to be the instrument of this design, the contrivance becomes a law. One reads of threats to bar certain foreign aircraft from the American market, and of Canadian measures aimed at sectors “most affected” by the new duties. In each case, the language is of national defence; the substance is of particular industries seeking to enlist the state in a conspiracy against the public.
Some will reply that, in a quarrel, retaliation is a point of honour; that to leave a neighbour’s tariff unanswered is to invite fresh insult. The Canadian leader candidly admits that a deliberate “pivot” away from trade with the United States “will come at a cost.” So it will. To divert commerce from the nearest and most natural partner, not because other markets promise greater mutual gain but because this one has become the theatre of political pique, is to ask the labouring poor to pay for the pride of statesmen. In moral sentiments, resentment may sometimes be proper; in commercial policy, it is a very expensive luxury.
I have never maintained that the magistrate should be idle in all things. Defence, the impartial administration of justice, and certain public works and institutions which no private undertaker could profitably maintain, are necessary duties of the state, and they must be financed. But tariffs employed, not as modest fiscal instruments, but as weapons to favour domestic producers or to bully neighbours, belong to the old mercantile system I once described: a system which confounds money with wealth, and sacrifices the many as consumers to the few as producers. The true wealth of a nation is the annual produce of its land and labour as consumed by its people, especially its poorest; to diminish this by design is to mistake the whole end of political economy.
It will be said that all parties are acting from self‑interest; and so, in one sense, they are. But self‑interest, to be socially useful, must be exercised under the rules of justice and under the quiet eye of the impartial spectator. When rulers treat commerce as a battlefield, not as a system of mutual service, they encourage in their people the vile maxim of the masters of mankind—“all for ourselves, and nothing for other people.” The invisible hand that often turns private gain to public benefit is then shackled; and the labourer, who buys dearer bread and dearer tools, discovers that he has been drafted into a war whose victories leave him poorer than peace would have done.
From the works cited
- An Inquiry into the Nature and Causes of the Wealth of Nations — The division of labour (the pin factory) as the engine of opulence, limited by the extent of the market.
- An Inquiry into the Nature and Causes of the Wealth of Nations — The critique of mercantilism: wealth is not money; policies rigged by merchants and manufacturers sacrifice the consumer to the producer.
- An Inquiry into the Nature and Causes of the Wealth of Nations — The measure of policy is the real consumption of the labouring poor: 'no society can surely be flourishing and happy, of which the far greater part of the members are poor and miserable' is his standing test.