Elections are not the time to discuss serious issues. So said Kim Campbell, Canada’s first and so far only female prime minister. While her statement reflects the reality that modern media often simplifies political debates to short, digestible bumper sticker points, we still expect candidates to demonstrate basic competence in managing public finances.
This lack of basic understanding was evident in the recent U.S. debate between Kamala Harris and Donald Trump. While Harris outlined the tax cuts and benefits she planned to offer lower-income Americans, she did not explain how she would fund these additional expenditures. Such omissions are all too common in election campaigns, where candidates often present appealing proposals without detailing the financial realities behind them.
Donald Trump went way beyond simply ignoring fiscal realities, displaying a basic ignorance of how tariffs, a key economic tool, actually work. During the debate, he claimed that the 100 percent tariff the U.S. imposed on electric cars imported from China meant that China was paying large sums of money to the U.S. to cover those tariffs. In reality, that’s not how tariffs work.
Trump suggested that the tariffs would allow Chinese electric cars to continue entering the U.S. market, but China would bear the cost. However, high tariffs typically reduce or even eliminate imports. For any Chinese car that makes it to the U.S., it is not China but American consumers who will ultimately pay the tariff, which will be included in the sale price of the car.
Not only will the price of imported vehicles be higher, but American car manufacturers, no longer facing competition from more affordable Chinese electric vehicles, will also have the opportunity to increase their prices. As a result, the overall cost of cars in the U.S. will increase, reducing the standard of living for all American drivers. There is also the environmental consequence of slowing the adoption of electric vehicles.
All tariffs, regardless of the products they target or the country that imposes them, ultimately raise prices and hurt consumers. Despite this negative impact, tariffs remain common. Why?
The usual argument in favour of tariffs is that they protect jobs. Local companies, unable to compete with lower-cost imports, would face job losses without tariff protection. However, this pits the interests of a few thousand workers whose jobs are at risk against the higher cost of living for the tens of millions in the wider population. While tariffs may preserve jobs in certain industries, they do so at the expense of making goods more expensive for everyone else.
The sectors affected by tariffs may be small compared to the number of consumers, but they are often well-organized and vocal. These industries are also often the least efficient and productive, making them more fearful of competition.
While allowing imports might cause some companies to fail and jobs to be lost, it can also drive businesses to improve. Faced with cheaper imports, many companies will work to become more productive and competitive, even on a global scale. In the long run, this could create more and better jobs, benefiting the economy as a whole.
We often forget that trade barriers like tariffs do more than just raise prices; they also limit variety and quality. When domestic producers no longer face competition from imported goods, they have little incentive to offer a wide range of choices or maintain world-class quality. Consumers’ only option is to take or leave whatever is locally produced. This lack of competition stifles innovation and ultimately lowers the overall consumer experience.
For example, before the first Canada/U.S. free trade agreement in 1987, imported wines were heavily protected by tariffs. As a result, BC wines, while not expensive, were often of poor quality, earning derogatory nicknames like “plonk de plonk.” If you wanted a better-quality wine, you had to pay a premium for imported bottles, making quality wine an expensive luxury for most consumers.
The prospect of good, cheap California wines had the BC wine industry in a dither until they were reminded that the BC wine industry was not in trouble because of looming free trade. They were in trouble because they made bad wine. Once they were faced with the California competition, they started making good wines that won international prizes. BC wine sales increased both at home and abroad creating a stronger and more viable industry.
Most individual consumers don’t have the time or knowledge to fight for access to less expensive goods and do not even realize that tariffs result in them being overcharged. It’s important for all consumers to understand how economic policies like tariffs affect their daily lives.
Especially during election time, we should expect our politicians to have at least a basic understanding of economics and how such policies impact the public.
Dr. Roslyn Kunin is a respected Canadian economist known for her extensive work in economic forecasting, public policy, and labour market analysis. She has held various prominent roles, including serving as the regional director for the federal government’s Department of Employment and Immigration in British Columbia and Yukon and as an adjunct professor at the University of British Columbia. Dr. Kunin is also recognized for her contributions to economic development, particularly in Western Canada.
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