Canada announced its retaliation Tuesday. Steel and aluminum tariffs double to 50%.
New duties hit dairy, appliances, agricultural equipment, pulp and paper, electronics, close to $20 billion worth of American goods, effective September 8. Carney called it a war. His finance minister called it fairness.
Somewhere in Pittsburgh, a steel executive is having a good year. His counterpart in Hamilton, Ontario, is about to have one too, because Canada just doubled the tariff protecting Canadian steel from American steel.
The Federal Reserve studied what happens next. Aaron Flaaen and Justin Pierce tracked the 2018-2019 tariffs industry by industry. Steel and aluminum tariffs protected steelmakers.
They also cost the broader manufacturing sector 75,000 jobs, net, after counting whatever the steel industry gained. The China tariffs cost another 230,000 manufacturing jobs, mostly through the input costs paid by companies that use steel and aluminum to build things.
Carmakers. Appliance makers. Construction. Every company downstream of a protected industry pays more for a basic input and either eats the margin or passes it to you.
Now do that twice. Once for the American company that buys Canadian steel. Once for the Canadian company that buys American electronics. Carney already admitted it out loud: the retaliation "will raise costs and reduce choice for Canadians."
Nobody on either side of this border is disputing what it costs. They're just deciding who to blame for it.
Tariffs aren't free. Someone always pays. Spoiler: it's the buyer, not the seller.
This time it's Canadian wine drinkers, American car buyers, dairy farmers on both sides, and every small manufacturer that needed steel and aluminum before this started.
Who's it working for?