The House

Tariffs 101: An explainer

The House asked Laura Dawson, director of the Wilson Centre's Canada Institute, to break down the intricacies of the duties — Tariffs 101, if you will.
An auto worker puts a wiring harness in an empty vehicle body during production of the General Motors' Chevrolet Equinox, Pontiac Torrent and the Suzuki XL7 at the CAMI Automotive facility in Ingersoll, Ontario, Dec. 21, 2006. (Dave Chidley/The Canadian Press via AP)

In response to U.S. tariffs on steel and aluminum, Canada is poised to fight back with its own dollar-for-dollar tariffs set to come into effect on July 1. 

Steel and aluminum are on the proposed list of duties, but so are things like pickles, beer kegs and chocolate. 

The Canadian government asked for thoughts from the public when crafting the list, but with such a broad range of products it can be difficult to understand the full impact on Canadian consumers. 

The House asked Laura Dawson, director of the Wilson Centre's Canada Institute, to break down the intricacies of the duties — Tariffs 101, if you will. 

What do the tariffs mean on a ground level? On pickles, for example.

"There's two kinds of tariffs, export tariffs and import tariffs. Mostly we're talking about import tariffs. That means on the pickles when that one dollar jar of pickles comes into Canada, then that 10 cents is assessed at the border. It's paid by the importer and that price is usually passed on to the consumer."

Where does that money then go?

"It goes directly into the federal treasury. So it's technically a source of government revenue … Since we've gone into a WTO system and the various trade agreements, we have reduced the tariffs that are in play. In fact, between the United States and Canada, almost everything is tariff free — everything except dairy and poultry products."

What about steel and aluminum tariffs? How will that work at the border? 

"It gets applied at the border, so as soon as whoever is landing that product there's paperwork that you need to fill out. And at that time, you pay CBSA the fees and tariffs that are owing at the time before you are cleared to land that product in Canada."

Steel often crosses the border several times before it becomes a final product. How many times does that tariff get applied?

"Every time it goes across the border the tariff gets applied. Sometimes there's things called drawbacks and remissions, so that if you're processing a product in Canada and then sending it back to the United States you can apply for a rebate."

How will the metal tariffs — and automobile tariffs, if Donald Trump makes good on that threat — affect consumers?

"It will definitely mean a cost increase. It means that that product will be more expensive …  I think the government has chosen to find things that there are Canadian domestically produced alternatives to so that you're not going to be immediately penalized. You can find some other mustard to buy, for example. But on things like steel and aluminum, you as a manufacturer in Canada are going to have a really hard time going out and finding another source of that product. It's going to be costly."

Laura Dawson from the Wilson Center's Canada Institute in Washington gives us a crash course on tariffs. 4:31