Retaliatory tariffs will only hurt Canada more, Regina economics professor says

WATCH: U of R Economics Professor Jason Childs breaks down the effects of the trade war between Canada and the U.S.

An economics professor with the University of Regina says retaliatory tariffs from the federal government against the United States will only make Canada’s economic situation worse.

Jason Childs says for an economy the size of Canada’s it is best to diversify the trade market instead of focusing on retaliation.

“Whenever you’re dealing with a small trading economy like Canada’s getting hit with tariffs by a much larger trading partner, all the economic modeling and theory says basically do nothing,” Childs said.

“Look for other trading partners, get on with your life, but you don’t want to retaliate because that makes your own recession worse,” he added.

When Trump’s sweeping 25 per cent tariff on all Canadian goods imported into the U.S. became a reality along with a lesser 10 per cent levy on Canadian energy, the federal government immediately retaliated with a matching tariff on $30 billion worth of U.S. products. That could rise to $155 billion.

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Prime Minister Justin Trudeau has said the items Canada slapped reciprocal tariffs on were targeted and meant to have as insignificant impact on Canada and its citizens as possible.

“Yes, getting it by tariffs by a trading partner is painful and damaging, but the retaliation only makes it worse,” Childs reiterated.

However, many Canadians have been adamant that hitting back is the right answer, including the premiers. This week, Saskatchewan’s Scott Moe praised the targeted retaliatory tariffs put in place by Prime Minister Justin Trudeau and also announced that Saskatchewan is not purchasing anymore American liquor to make available for private retailors. Moe also said his government is working diligently to minimize procurement from the U.S. and encouraged others to do the same.

“There’s this push to look tough and idea that by looking tough we can end it sooner, that may have worked this time, and it may not have, I’m leaning towards not, but it’s really hard to [tell],” Childs said.

“When a child throws a tantrum, should you throw one too,” he added.

Childs said if the vast belief is that Trump’s tariffs would damage his own economy it makes little sense for Canada to levy tariffs on its own people.

“I think the larger lesson is that we need to diversify our trading partners. We went through this about eight years ago when the NAFTA agreement became the USMCA and there was a great agreement at the time that we need to reduce interprovincial trade barriers and we need to build up infrastructure and trading opportunities that go either between provinces or other countries, not the U.S.” Childs said.

Childs says in those eight years since nothing on that front has taken place.

“We didn’t see a major reduction in interprovincial trade barriers, and we didn’t see an uptick in infrastructure that runs east-west, in fact we saw a lot of things happen that made infrastructure that runs east-west much more difficult to accomplish,” Childs said.

According to Childs, which could put Canada in a position to take a significant GDP hit if we lose access to the American economy.

As for Trump, on Thursday he again put a temporary delay on tariffs for some Canadian products, mostly ones that are included in free trade agreements through the United States-Mexico-Canada Agreement (USMCA). The White House said about 38 per cent of previously tariffed goods qualify for the pause.

Click here for more coverage on the current trade war between Canada and the U.S.