Port of Vancouver. Photo by Roy Luck/Flickr.

The ongoing trade war between Canada and the United States has conditioned many people to conceive of tariffs as inherently punitive. This obscures the fact that tariffs are just one tool that states can employ as part of their industrial policy. The gradual removal of tariffs and liberalization of trade in the 20th century was partly the result of lobbying from corporations which sought to reduce their labour costs by offshoring production to countries with low wages and fewer unions. This process negatively impacted Canadian industry and workers. The Trump administration’s use of tariffs is haphazard and destructive, but we should not let that foolishness turn us into evangelists for free trade, or convince us that all forms of tariffs and economic nationalism are inherently bad.

A tariff is simply an import tax that is levied by the government on certain products. When those products are imported, the importer must pay the government that tax. The result is generally that the price of the imported product is raised, discouraging consumption. Accordingly, protective tariffs are meant to promote domestic goods and industry by giving them a competitive advantage. The primary drawback of tariffs is that they increase prices for domestic consumers by decreasing foreign competition. As a tax, the collection of tariffs can also contribute to government revenues.

Canada’s earliest industrial policy was John A. Macdonald’s National Policy, which placed high tariffs on American products from 1878 until it was phased out around the Second World War. The point of the policy was to protect Canadian manufactures from American competition. While it benefitted eastern Canada’s manufacturing base, the policy was disliked in the west as it limited westerners’ access to foreign markets and caused them to pay more for goods from eastern Canada. The success of Macdonald’s National Policy supports the “infant industry argument” of Alexander Hamilton, who had argued that underdeveloped domestic industries require protection to grow.

When the Canada-US Free Trade Agreement was being debated in the 1980s, its opponents worried that it would damage Canada’s manufacturing base because........

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