Tariffs on High Profit-Margin Goods

The tariffs that would work would be tariffs slapped on high profit margin items such as luxury cars (e.g. McLaren’s, Lamborghini’s, Ferrari’s), planes (private jets), clothes, vessels (electric boats), etc. which can easily be produced domestically since the labour cost would not eat into the profit margin. Of course, for some of these items, such as FASHION, yes the profit margin is low, but not because of labour. It’s also not something I strongly believe in so I would never recommend tariffing them as a priority unless it was significant in terms of contributing to the trade-deficit. An opposite example is Canadian oil. We sell Canadian oil to the USA at a discount. It makes no sense for the USA to tariff Canadian oil since the USA benefits from the lower priced oil! It’s an idiotic policy only an imbecile would even suggest.

Free-trade is good because it allows countries to leverage their competitive advantages to increase global economic output. The only reason a tariff exists against Chinese Electric Vehicles is because our country has subsidized the electric vehicle industry too much to allow competition from China. This is also another reason that the government should try its best not to pick industries. If the government had never picked EV batteries or the electric automobile industry in general as the industry to grow Canada’s economy, then there would be no need to tariff Chinese EVs, and consumers could enjoy cheaper EVs. EVs are touted as a panacea to climate change, one I disagree with (read: Climate Change as a Service). However I’m pointing out the hypocrisy in stating that climate change is important enough to tax domestic polluters, but not important enough to ensure the transition to EV is as affordable as possible?

Pursuing a Lower Trade Deficit

If the goal is to lower the trade-deficit, such as the one Canada has with the USA when we exclude energy exports, steps should be taken to pursue the alternatives and substitutes to the imported item. In the case of cars, denser cities (zoning reform), and better intercity transportation (high speed rail, see Alto) should be pursued…aggressively. In Canada’s specific case, there has not been an aggressive push. These projects and the housing accelerators zoning reform efforts have been very slow, both taking decades to start.

Yes, Canada is a net importer of vehicles and is in a trade-deficit with the US if we exclude energy. From Setting the Record Straight on Canada-U.S. Trade,

1. Remove Canadian energy exports from the equation and the trade story flips. Ex-energy, the U.S. enjoys a trade surplus with Canada of around C$60 (US$45 billion). (Chart 7)

2. Flipping this argument on its head, Canadian auto manufacturing has room to expand. Canada produces only 14 car models but consumes 325 models. The U.S. produces 121 models of the 328 models consumed by Americans.

3. America Registers a Trade Surplus with Canada in Autos

Substitutes With a Catch

Okay so the country decides to pursue energy independence and better transportation. Should they give the contract to a single company and overpay? No. Global procurement is key, because importing high-profit goods like machinery, nuclear reactors, and boilers is not a win for bolstering the economy. Neither is giving a defence contract to an Australian firm for a project that a Canadian company also specializes in.