2025 is not even three months old yet and “tariff” is already the prohibitive favourite to be named Word of the Year. You can barely turn on the TV or radio, or walk into your favourite coffee shop without hearing the word tariff being bandied about along with “trade war”, “Trump”, and “51st state”. And it’s even worse on social media... a lot worse.

Unfortunately, most people know very little about tariffs, why they are used, what they do, or what’s their potential impact except that they are bad for consumers, or so they’ve been lead to believe.

They are two types of tariffs. Import tariffs on goods coming into the country, and export tariffs on goods leaving the country.

Governments have the discretion to place tariffs on anything they want. In the past, they have been used primarily to protect domestic producers and suppliers. For instance, if your softwood lumber industry is being negatively impacted by the ability of companies to import lower-priced, foreign-sourced softwood lumber, the government might impose an import tariff to level the playing field.

What Trump is trying to do by threatening to impose an import tariff on Canadian raw materials and products has nothing to do with protecting American industries and has everything to do with his total lack of under-standing the subject.

He’s upset that the U.S. spends $36 billion more on imported products from Canada than Canadians spend on U.S. products. The difference is commonly referred to as a trade deficit, when it should properly referred to as simply a difference

Trump hears the words “trade deficit” and immediately sees it as a subsidy. In other words, he thinks Americans are subsidizing our economy to the detriment of their own. Someone needs to explain to him that the biggest reason for the difference is simply the fact that U.S. has 10 times the population we do. Of course they are going import more in materials and goods than we do. The other mitigating factor is that the U.S. imports a huge amount of oil and natural gas from us, while we import very little in comparison from them. The difference in what the U.S. imports from Canada to what we import from the United States makes up nearly all of the U.S-Canada trade deficit.

So Trump’s reasoning behind his im-pending decision to impose across-the-board tariffs has no real basis in fact – not that he cares.

But getting back to my point that tariff is just another world for tax.

When a country imposes an export tariff on goods and materials coming across their border, the business or manufacture which purchase the goods and materials must pay that amount to the government, and most likely they will pass that cost on to the end consumer who will also be paying more in taxes.

As an example, Company A in the United States wants to buy $1 million in material from Canada. Trump imposes a 25 per cent tariff on that material so now that company has to pay $1.25 million. They then take that material and turn it into a product which the sell for 25 per cent more. Say the product would normally cost $100. Now it cost $125 and if there’s a five per cent sales tax on the product the government know makes an extra 25 per cent in sales tax.

Trump gets an extra 25 million which he can use to help fund tax cuts to his billionaire friends. The states get a 25 per cent boost in their sales tax revenue. And the American consumer is left to pay for both.

On our side of the border, Doug Ford is being applauded as a hero for standing up to Trump and threatening to impose a 25 per cent tariff on energy exports to New York, Michigan and Minnesota.

It is estimated that the tariff would gen-erate between $300,000 and $400,000 in additional revenue per day, which Ford says the province would use to help business adversely affected by the trade war.

But make no doubt it, at the end of the day it is we the consumer who will impacted the most by tariffs and an ongoing trade war.

Here’s one last example. The U.S. imposes a tariff on steel and aluminum forces the prices of U.S. products to go up. Canada imposes a tariff on those same imported goods, forcing the price to go up even further. Leaving you and I having to make a decision to either by the product at the inflated price or buying something else – preferably something that is made in Canada.

Which is likely the only good thing that will result from a trade war – Canadians will start buying more Canadian-produced goods and materials providing the prices don’t go up and they’re not terrified into keeping their money in their wallets due to the threat of a possible recession.

(If you wish to comment on this or any other View Point column please write to Fred Sherwin at fsherwin@orleansstar.ca)