Investopedia defines a tariff as “a tax imposed by one country on the goods and services (hereafter just ‘goods’) imported from another country“. The tax is paid to the government when the good is imported into the country. If the importer sells the good to a third party, the importer may pass the full tax that he has paid, to an end consumer through a price increase.
A tariff may be imposed on an imported good to increase its market price so that a home industry whose products are globally noncompetitive can still compete in its home market. Another reason for imposing tariffs is as with other forms of taxation, to raise revenue for the state. A third reason which is Donald Trump’s favourite, is as a form of economic warfare to gain a negotiating or economic advantage over a foreign country. Trump also uses tariffs as a means of “punishing” another country if the country has displeased him.
The important thing to understand about a tariff is that it is a “consumption tax” ultimately paid by the end consumer which is you. As a Canadian, you do not pay any part of a Trump tariff. You do, however, pay in full a Carney “counter-tariff”.
When a government collects a tax as in the recent gas tax, and says they are returning it to the consumer, it is an obfuscation of the truth, to be polite. If that is what they really wanted, the simplest thing is not to collect it in the first place. However, they do it because they will always retain some of it for themselves. They will also have to increase the size of the bureaucracy to manage it. Also, in the end, since they never keep track of every source, they redistribute it in a way that increases their political advantage.
With tariffs, they say they are returning it to those who initially paid it. In reality, they are returning money only to larger industries leaving small businesses to flounder. Since the large corporations have had their import tax costs already paid by you at the grocery shelf, they are out nothing. The gift from the government ensures their political support and might possibly be passed on to us as a small reduction in price. I’m not holding my breath.
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