Summary
Canadian Prime Minister Justin Trudeau announced retaliatory tariffs after Donald Trump confirmed 25% tariffs on Canadian goods and 10% on energy, set to take effect at 12:01 a.m. Tuesday.
Trump justified the move by linking it to fentanyl smuggling concerns.
Trudeau called the tariffs “unjustified” and imposed 25% tariffs on $155 billion in U.S. goods, with $30 billion effective immediately and the rest in 21 days.
He warned of price hikes and job losses in the U.S., arguing the move violates Trump’s own trade agreement from his last term.
Tariffs on imports make the imports more expensive and push people to buy non-tariffed goods. This causes the exporting company to lose income from their exports
Capitalist companies may lose income from lost sales, but they will be raising prices to match the tariff. Probably throw an extra 5-10% on top of that for greed, because they can blame it all on the tariff.
Sort of. The economy is not as robust as consumers like to believe it is.
Say you’re a manufacturer and you make Widgets, and an essential component for those is Greebels, you likely have a supply chain already set up to have those Greebels delivered to your factory. Well, if those Greebels are now subject to a 25% tariff, they become that much more expensive to import. In theory, this would cause you to look for alternative domestic suppliers of Greebels to avoid having to pay what is essentially a 25% tax just to get essential components for your otherwise domestic-made product, but there are a number of factors that might make that impossible. For example, you might be under exclusive contract for a number of years with the foreign supplier, or you might only use Greebels supplied from the foreign Gizmo Corporation in your Widgets because you based your design on using their proprietary components and you can’t switch to a competitor without redesigning your product entirely or violating intellectual property laws.
Even if none of those unusual edge cases apply, you might still opt to order your Greebels from the Gizmo Corporation - perhaps they are still cheaper than a domestic alternative after calculating the price difference, especially considering the labor laws here are more strict than it in in places such as China or Bangaladesh where minimum wage laws are almost nonexistent. If that is the case, there may not be any real domestic alternative because they can’t stay competitive in the global market by paying their workers a 1st world minimum wage. Finally, setting up your own factory for turning raw materials into Greebels to use in your Widgets is a prohibitively expensive venture that likely wouldn’t cause you to turn a profit for many years and would still require you to source the raw materials which may not be available domestically.
The most likely/realistic outcome is having the Gizmo Corporation agree to send their product to be manufactured/assembled/stored in a factory/warehouse in another country that is not subject to the tariffs and then import it, which bypasses the tariff altogether without compromising the specific product you are used to ordering (so long as the rerouting doesn’t end up costing more than the import tariff)
or
Your company will eat the cost of the import and raise the price of Widgets by 25% to compensate for the increased cost per unit.
There will probably be a tiny dip in the exporting company profits at a result of tariffs, but they’re not going to have a significant enough drop in revenue to cause any kind of panic.