JAY GOLDBERG: Mad at Trump? Cut taxes, don’t raise them

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High-stakes talks between the Carney government and the Trump administration fell apart last weekend. As a result, the United States has imposed billions of dollars of tariffs on Canadian goods entering the U.S.

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But is the appropriate response “dollar-for-dollar” tariffs, as Prime Minister Mark Carney has pledged to impose, as of Sept. 8? Ontario Premier Doug Ford, one of the biggest backers of dollar-for-dollar tariffs, said on American television just days ago that “a tariff on Canada is a tax on the American people.” Ford rightly argued that adding import duties on Canadian goods entering the United States simply makes life more expensive for U.S. consumers.

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The same argument applies in reverse.

Should the federal government move forward with dollar-for-dollar tariffs, life will get more expensive for Canadians.

Many Canadians, angry with the Trump administration, will say Canada cannot simply do nothing in the face of U.S. tariffs.

Taking care of Canada

So, here’s a proposal: let’s do something. Let’s make Canada more competitive and push to grow the economy more here at home.

How do we do that?

Not through billions of dollars of government subsidies, which seems to be the federal and provincial governments’ answer to everything. Instead, let’s work to address what’s made the Canadian economy stagnate over the past decade: taxes.

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When the Trump administration dramatically cut corporate taxes through the Tax Cuts and Jobs Act in 2017, Canada lost its corporate tax advantage that was carefully cultivated under the Chrétien, Martin, and Harper governments.

Back in the early 2000s, there was a bipartisan consensus that Canadian corporate taxes were too high and were standing in the way of growth. So, governments under both parties at the federal level, and in many of Canada’s provinces, worked to reduce them.

But we have yet to see a similar response to the Trump tax cuts. Instead of the Carney government spending tens of billions of dollars on additional government spending to try to prop up government-favoured industries, let’s deliver relief for all businesses by reducing the federal corporate tax rate to finally address actions taken by the U.S. nearly a decade ago.

How about reducing internal trade barriers?

Canadians are rightly angry at U.S. tariffs imposed on Canada, but how many Canadians know about the cost barriers standing in the way of trade domestically?

The government of Canada itself recognizes that removing internal Canadian trade barriers could boost Canada’s economy by up to $210 billion, because interprovincial trade restrictions act as a national tariff equivalent to roughly 9%.

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Carney made a big deal of calling for the end of domestic trade barriers and has taken some action to do so at the federal level. But most provinces have been quite reluctant to remove their trade barriers. If we’re serious about becoming more self-reliant and responding to Trump’s tariffs, Carney should insist all provincial trade barriers be dismantled immediately.

Finally, there’s personal taxes. Even before the latest round of trade strife, more than 46% of Canadians said they were $200 away from not being able to pay their bills. That number will surely climb further still.

Gov’t missing opportunity

The Carney government could recall Parliament and deliver a relief package for Canadians. Again, it should stay away from the old approach of stimulus spending and err on the side of tax relief.

Canadians have yet to receive a healthy dose of tax relief under Carney’s watch. Yes, he has tinkered at the margins and, rightly, removed the consumer carbon tax, but much more can and should be done. Carney should deliver the biggest personal income tax cuts since the Chrétien era.

Dollar-for-dollar tariffs sound catchy. It might even make some Canadians feel satisfied if and when the Carney government imposes them. But the long-term effect will be higher costs for hard-pressed Canadian consumers. Fuzzy feelings isn’t good policy.

Trump has chosen to raise taxes on Americans. As a response, Carney should cut ours.

Jay Goldberg is the North American Affairs Manager at the Consumer Choice Center

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