The Cost of Standing Up to Protectionism

Price and Welfare Impacts of Canada's 2018 Retaliatory Tariffs

Bibliographic Data

ID6417484
AuthorsTazia Khushboo (University of Calgary, corresponding author)
Year2025
Volume51
Issue3
Pages319-343
Publication date2025-09-01
Peer ReviewedYes
Open AccessNo
TypeARTICLE
VenueCanadian Public Policy (JOURNAL)
Journal identifiersISSN: 0317-0861 • E-ISSN: 1911-9917
PublisherUniversity of Toronto Press Inc. (UTPress) (PUBLISHER)
DOI10.3138/cpp.2025-006
OpenAlexW4414540461
LanguageEN
References cited15

When the United States imposed tariffs on Canadian steel and aluminum in 2018, Canada responded with retaliatory tariffs on US goods worth $16.6 billion. I analyze how much of these tariffs passed through to import prices. The extent to which import prices increase because of tariffs is the tariff pass-through rate. A lower pass-through indicates that foreign exporters—rather than domestic importers—paid for most of the tariffs, implying better welfare consequences for the tariff-imposing country. Using Canadian import data and retaliation information, I exploit a triple-difference strategy to estimate the pass-through of Canada's retaliatory tariffs. On average, import prices increased to reflect the full tariffs, leading to zero terms-of-trade gains and welfare losses of $464 million. Thus, each dollar of the $1.76 billion tariff revenues raised imposed an average cost of $1.26 on Canadian importers. However, product-level analysis reveals that pass-through was incomplete for a subset of the targeted US products

Canadian Policy and Governance · Fiscal Policy and Economic Growth · Global trade and economics

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