Trump is imposing tariffs on Canada starting tomorrow. Here is a simple example of what we means by tariffs.
The United States Government Imposes a Tariff
The U.S. imposes a 10% tariff on imported cars from Canada. Importers inside the U.S. will have to pay the Tariff. When a company imports a product, it must pay the tariff to customs.
Example: If a car costs $30,000, the importer pays an extra $3,000 (10%) to the U.S. government. Importers pass the extra cost to retailers and consumers. For example a dealership might raise the car’s price to cover the tariff. In that case U.S. customers lose.
Impact on Trade & Economy
Domestic producers benefit since foreign goods become more expensive, making local products more attractive. This is what Trump has in mind. If you want to sell to the United States, Trump insist you build it in the United States. But we see in this case consumers in the U.S. pay more for imported goods. Foreign exporters, in this case Canada, may lose business, and some might retaliate with their own tariffs, which is what Ontario premier Doug Ford is threatening to do.
This illustration shows that the USA – Canada auto industry is very much intertwined and that the process of making a car requires that it cross the border a number of times before it emerges as a finished product. Each time it crosses the border tariffs are imposed.
