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Increasing tariffs, especially for small nations, is a lot like (pardon the graphic metaphor) shooting yourself in the head in the hope that the blood spatter will harm your neighbor. It's messy and it really doesn't work.

The ideal long-term strategy for Canada is to develop stronger trade links with Europe, the UK, China, Japan, Korea, etc, because, as the repeated softwood lumber wars prove--the threat of Trump tariffs not withstanding--the US is simply not a reliable trading partner. Of course, this would take decades of sustained governmental effort and is about as likely as the US ever taking practical steps to fight global warming.

In the short term, however, I believe the most effective countermeasure to Trump tariffs would be to withdraw from our intellectual property agreements with the US and start domestically reproducing products bound to US IP. US IP is a rentier's racket in the first place and cutting off the rentiers' income would hit the US directly while increasing, rather than decreasing, Canadian human welfare and access to capital goods.

Dr. Woolley:
This is a lovely piece of work. I enjoyed reading it immensely. It did stimulate a couple of ideas.
In terms of immigrant acceptance in the workplace, I think it depends on the environment and the language skills. I am a WASP consultant but many of the teams and firms, with whom I work, are well-stocked with first-generation immigrant consultants in relatively senior roles. Of course, I am talking here about the urban consulting market place of Toronto which is very special. Toronto has one of the most ethnically diverse workforces anywhere on the planet.

I am always concerned about the underutilization of immigrants. My suspicion is that the anglo name bias comes from a concern for language skills that unsophisticated employers might have. One way of making sure that they contribute to our labour force fast and effectively is to increase the quality and quantity of government-supplied language training emphasizing communication skills.

On your point about trade diversification, the trade literature you mention is important and there are other examples. Such trade development is obviously going to be a two-way street in terms of imports and exports. We should consider that in our trade promotion activities and target support to immigrant-led startups as well as old-line firms.

Thanks for an informative post.

Could I offer a different perspective, a politically neutral perspective?

Please begin with current conditions considered as the base case. Assume trade between the US and Canada of consumer products that are produced in both countries in some ratio. Either country can introduce a border tariff that would increase the final cost to the customer but no such tax is now in place. Either country can pick whether producer or consumer will write the tax check to government. The choice made will change the relative product prices experienced by both consumers and suppliers.

For the sake of discussion, let's assume that the US decides to increase the number of workers employed in rural America. Soft wood lumber is a product made in both the US and Canada, entirely originating in rural America and rural Canada. Lumber is mostly used in urban America where economic activity is at currently high levels. Relative use in Canada is also mostly in the urban areas.

A US inspired border tax would be paid by US lumber importers, with the cost passed on to urban consumers in-as-much as American lumber producers were unable to fulfill demand at increased prices and American consumers were able to pay increased prices at reduced consumption rates. (We certainly would NOT expect American lumber workers to increase consumption (due to increased work and wages) at anywhere near the demand drop caused by consumer lumber price increases.) The reverse effects could be expected to occur in Canada (decreased lumber worker jobs and wages; decreased lumber cost to Canadian urban areas).

Why would the combined economies of the US and Canada be reduced by a new border tariff? Because the averaged consumer cost of the taxed product is increased.

The relative economic shifts described would apply to every product blessed with a border tax, no matter which country introduced the tax.

Thanks again for the informative post.

Roger, so lumber tariffs as redistribution from urban to rural Americans? That's a great insight - thanks.

Pmj - Thanks for your kind words. Yes, I agree completely on the importance of language skills. I think Canadian immigration policy has improved a bit on this score - I think more weight is being placed on language skills when evaluating economic immigrants, and that's a good thing.

I can't get your post out of my mind! It illustrates so many important economic basics!

Having offered a rather cold economic analysis of tariff effects previously, maybe I should now offer a political response. Knowing the mechanics of tariffs, what should the "fair" response of politicians be?

My lumber example identified three groups involved with the lumber trade that would be hurt (because the combined total trade was diminished): two Canadian groups and one American group. Only one group benefited - rural America. Would that be "fair"? I would argue it is not fair and remember that this is a political argument, not an economic argument.

Turning to another point illustrated by your post, economics is a study of the balance of human trade. I think of "balance" as illustrated by a mechanical pivot balance. Supply and demand shift from side-to-side constantly (over time) in response to human choices. The addition of government taxation represents a thumb on the scale, creating a tilt in the supply-demand balance.

I believe that government should use as little thumb as possible in collecting revenues for essential government services. That said, some thumb is inevitable so our economic focus (I think) should be on distributing the inevitable supply-demand-balance tilt in a "fair" fashion. Politics based on economic understanding.

Thanks again for your excellent, informative, post.

I would also argue the demand drop would kill rural america as well.

Minor correction: in 1932 India was not a self-governing country in any meaningful sense, unlike the "Dominions" such as Australia, Canada and South Africa.

Almar - sorry, that's really bad. I shouldn't have made that mistake.

"Productivity soared but, as Laval University economist Bernard Beaudreau argues, real wages failed to keep up. Firms were able to produce goods in unprecedented volumes, but consumers lacked the purchasing power to buy them."

I thought there was a good bit of wealth/income equality in the late 1920's. If so, why didn't the rich buy the goods?

Also, were the other people able to buy the goods somehow?

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