Tax & Trade Blog

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"RETALIATORY TARIFFS - STILL A BAD IDEA?

UNILATERAL FREE TRADE WOULD BE A BETTER ECONOMIC IDEA

 The trade relationship between the United States (“US”) and Canada has eroded with tensions devolving into a trade war.

As of today, the US imposed tariffs on Canadian goods appear to be "off again" until April 2^nd, but Canada's first round of "retaliation tariffs" are still "on" ("CT-R1").   That is strange.  Canada is "on" despite no current US tariffs to retaliate against?  Is Canada now the sole aggressor?

Should this on-again-off-again trade war continue to escalate, the US will likely impose even further reciprocal tariffs on Canadian goods, along with additional tariffs on Canadian steel and aluminum products, and timber, lumber and derivative products. In turn, Canada is planning to implement a more robust second round of tariffs targetting an additional $125 billion in US goods ("CT-R2").  

As we questioned the tax and health policies of Canada’s regulations on vaping products here, we note the Department of Finance’s position on non-alcoholic beer, which has been duty-free from an excise tax perspective since July 2022.  This is an example of good tax policy, focussing on promoting the adoption of safer, healthier alternatives by reducing the tax burden on substitutable products.  It contrasts to the current approach to vaping products, which involves taxing them at high rates, almost comparable to those applied to smoking products.

Excise Duty on Alcoholic Beer

In Canada, excise duty is imposed under the Excise Act on all beer produced for commercial purposes, with rates dictated by alcohol strength, production volume, and whether the beer is brewed domestically or imported.