These extreme measures have worked the Canadian economy with a lot uncertainty concerning the future that this results in job losses within the auto industry and a downturn on the actual estate market. In response to this, Canada implemented retaliation tariffs and is working on constructing higher trade relationships with other countries to cut back our trust within the USA with Prime Minister Mark Carney, which explains that the trade relationship of Canada-US, as we knew it. “It’s over.”
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But what exactly are tariffs?
Think of tariffs like a canopy fee at an event. The countries mainly raise an entry fee for things that come from other countries. When the US cars imported from Canada and a tariff is on the market, the USA will receive an extra fee on the border before the products are embedded. This increase in costs is usually passed on to consumers.
The tariffs are imagined to “protect domestic companies” – in other words, governments want them to purchase goods which were manufactured of their country. However, if the governments arouse the tariffs, as they recently done by Trump, the prices of the products also must increase to guard the profit margins and make foreign products dearer. It is the individuals who buy the products that pay the tariffs and these suppliers have the consequences of the shortage of competitive prices.
Obviously, some things are simply beautiful, but the actual difficulties occur when tariffs on on a regular basis necessities comparable to cars, food and materials comparable to aluminum and metal (consider cars, laptops, telephones, construction, tools and medical equipment). Then trade wars begin and the results could be felt each immediately and for the approaching years. The sort of things future generations will learn in history lessons.
Speaking of history, when was the last time there was something between the USA and Canada? Donald Drummond, former chief economist at TD Bank and professor and extraordinary professor on the School of Policy Studies at Queen’s University and the CD Howe Institutes at Queen’s University, leads us back to the Smoot-Hewley Tahwley Tariff Act of the Nineteen Thirties, by which a US law had built on over 20,000 tariffs.
“They were higher and much omnipresent than steel and aluminum,” he says. “And previously the 1890s were. This is the third time in the history of Canada and the USA in the past 130 years. Both the 1890s and the 1930s ended very badly, not only for the world and Canada, but ended very badly for the United States.”
“You have not managed your goals and removed tariffs in both cases,” explains Drummond. “Especially in the case of the United States in the 1930s – really dramatic – only their policies change completely after a while.” The Nineteen Thirties reflected recent events by which the United States imposed higher tariffs and initiated other countries. In business literature, it’s what’s often known as a spinning network diagram and illustrates every round of retaliation: the United States increases tariffs, others react and the cycle continues.
Basically, global trade collapsed, the worldwide economic crisis worsened and politics was missing backwards – hard. What happens now, says Drummond, “seems to be very, very familiar.”
