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Philip Cross: The U.S. loses more from tariffs than exporting nations do

It's becoming clear that the best way to fight Trump's tariffs is waiting for the political effects of higher American prices

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Leaders around the world must be fed up with President Donald Trump’s repeated threats of tariffs to impose his wishes. They need to be patient. By now it’s clear the most effective way to stop Trump’s reflexive tariff threats is to encourage them, since they clearly raise prices for Americans.

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So far this year, Trump has threatened a 10 per cent tariff (later raised to 25 per cent or more) on any EU nation that resisted his hostile takeover of Greenland, a 25 per cent tariff on countries trading with Iran, and various and sundry tariffs to punish Canada for reaching a trade deal with China and generally resisting assimilation into the U.S. Trump has also threatened to block the opening of the brand new Gordie Howe Bridge linking Windsor and Detroit.

Philip Cross: The U.S. loses more from tariffs than exporting nations do Back to video

Economists agree: Tariffs are more costly for consumers and businesses in the country imposing them. A new study by Mary Amiti, Chris Flanagan, Sebastian Heise and David Weinstein of the New York Fed finds that the average tariff rate on U.S. imports rose from 2.6 to 13 per cent in 2025, and “nearly 90 per cent of the tariffs’ economic burden fell on U.S. firms and consumers.”

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Canada’s experience in dealing with Trump’s trade war confirms that tariffs do more harm to the country imposing them. The Carney government’s response to the Liberation Day tariffs was to impose Canadian tariffs on a wide range of U.S. products. As soon became clear, they had no material impact on the overall U.S. economy but did increase prices for Canadians, raising the possibility that the economic damage would be compounded by higher interest rates. Realizing its mistake, the government withdrew the tariffs after several months without having won any concessions from the U.S.

It would be better in the long run if nations simply allowed Trump’s tariffs to exert the inevitable upward pressure on prices and disruption of supply chains for consumers and small businesses. These cost squeezes hurt small firms more than large because of their lower profit margins. That’s important, since consumers have more frequent contact with the owners of small firms, who can explain in detail how the tariffs are causing the higher prices.

High prices and affordability remain the main concern of American voters, aggravated by the recent spike in oil prices. Keeping the upward pressure on prices in an election year increases the likelihood Democrats re-take control of at least the House of Representatives. This would embroil the Trump administration in endless investigations and probably even impeachments. It would also reinforce the influence of any wiser heads in the administration who understand the harm tariffs do to the economy, whatever the president may believe.

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The downside of waiting for Trump’s tariffs to self-destruct in the U.S. political system is how demeaning it is to watch his threats force other leaders to “approach him as supplicants,” as financial journalist Philip Coggan points out in his recent book, The Economic Consequences of Mr. Trump.

Responding to Trump with tit-for-tat tariffs also endorses his mistaken belief that foreigners pay the cost of his tariffs. Many leaders’ fear of threatened tariffs suggests they do not really believe what they so often insist on, namely, that trade is mutually beneficial and the costs of tariffs are borne mainly by the country imposing them. Their acting as if U.S. tariffs hurt them or their firms more than American consumers and businesses only reinforces mercantilist thinking and encourages further tariff threats. National leaders trading with the U.S. need to have the courage of their oft-professed convictions that trade benefits both parties to it.

Philip Cross is a senior fellow at the Macdonald-Laurier Institute.

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