519-646-2222Taxation by Tariff
Canadians, it appears, are not always the most politically informed, often making emotional decisions at the polls during elections, which have seen dwindling participation rates. This creates the illusion of majority governments. The latest development—taxation by tariff—resembles a scene from a grand French farce.
Doug Ford’s election as Premier of Ontario, following the popularity of his brother Rob Ford, the former Mayor of Toronto, was rooted in his image as a straightforward, working-class leader. His initial platform was focused on austerity, promising to correct the excessive spending of the previous government. However, Ford has since surpassed his predecessors in government spending and embraced corporate welfare as a quick-fix for economic growth. History shows that such short-sighted strategies often lead to negative long-term consequences.
At the federal level, the critique of the government’s fiscal policies is simple. Canadians have never been more dissatisfied with a ruling party. This discussion, however, focuses not on political ideologies but on the real-world consequences of political decisions.
It’s important to remember that Canada, second only to Russia in terms of natural resource wealth, also has one of the lowest population densities globally and is geographically positioned next to the largest consumer economy in the world—the United States. Yet, despite these advantages, Canadians are not enjoying widespread prosperity. Mismanagement by alternating political parties has contributed to this outcome.
Unfortunately, Canada continues to lead the rankings in negative categories: high taxes, inefficient healthcare, generous corporate welfare, bloated bureaucracy, mounting consumer debt, overpriced housing, white-collar crime, rampant banking fraud, costly taxpayer-funded broadband, and a lack of national identity.
Meanwhile, in the United States, Donald Trump’s rise to prominence was largely due to a rejection of failed globalist policies. He was elected on promises of world peace, financial responsibility, and domestic economic growth. As of now, he seems to be making progress on these fronts, but questions remain about the sustainability and long-term impact of his policies.
One of the challenges faced by the Trump administration is border security, with unprecedented levels of human and drug trafficking. The U.S.-Canada border, the longest land border in the world, lacks sufficient enforcement and is difficult to monitor effectively. While the problem is more pronounced for the U.S., Canada is often used as a gateway for individuals and goods heading south, raising concerns about narcotics like fentanyl crossing the border at higher rates than officially reported.
President Trump’s administration also aimed to repatriate manufacturing jobs, reduce wasteful spending, secure borders, and rebuild the U.S. economy. One strategy involved the threat of tariffs, particularly on countries like China and Canada, which rely on government subsidies to lower production costs and compete internationally.
Canada’s manufacturing sector is already in decline, relying heavily on the automotive industry and importing cheap materials from Asian countries. Tariffs introduced by the Trump administration were designed to discourage U.S. companies from outsourcing production to countries with lower labor costs, while raising wages in both Canada and Mexico. These measures aimed to level the playing field for U.S. businesses.
The tariffs have sparked political debate on both sides of the border, but they ultimately impact American consumers, as prices on imported goods rise. Canadians, on the other hand, are less directly affected by U.S. tariffs.
Historically, Canadians have faced similar protectionist policies. In the 1970s and 1980s, tariffs under the Auto Pact were imposed to protect U.S. automakers. Despite these added costs, Canadians accepted the price hikes to access higher-quality vehicles.
From an American perspective, the tariffs make short-term sense by encouraging domestic manufacturing and creating jobs. However, the long-term effects may be more problematic, as other nations may eventually find it difficult to afford American-made products, leading to reduced demand.
Canada’s response to these tariffs has been somewhat farcical. Premier Doug Ford, who campaigned on promises of cheaper alcohol, has focused much of his attention on this issue. Ford even threatened to remove U.S. alcohol from the shelves of Ontario’s Liquor Control Board stores, though he reversed course when tariffs were temporarily suspended. However, he has recently renewed this threat, specifically targeting Kentucky bourbon.
The LCBO, as the largest purchaser of alcoholic beverages globally, plays a significant role in the province’s economy. Comparatively, the price of alcohol in Canada is much higher than in the U.S., highlighting the broader issue of inflated costs.
The Canadian federal government’s reaction to U.S. tariffs was swift, implementing a 25% tariff on all U.S. imports, effectively adding a $125 billion annual tax burden on Canadians. In a country where housing prices are soaring and a third of the population struggles with food insecurity, this move seems difficult to justify. It signals a government intent on eroding both the social and economic fabric of the country.
Canadians are already overtaxed, bearing a 13% Harmonized Sales Tax (HST). Adding a further 25% tariff on U.S. imports effectively doubles this tax burden. In the end, neither U.S. tariffs nor Canada’s retaliatory measures benefit either country’s economy. In the long term, U.S. tariffs may damage their own economy as more countries seek alternative trade partners, while Canada’s excessive taxation has already weakened its economic standing.
Ultimately, the solution to our economic woes lies in implementing fair taxation policies, ensuring that the wealthy contribute their fair share, while offering meaningful tax and debt relief for those who cannot afford to live in an increasingly corporatized world.