Amus de Wauchope

Instituting a tariff was one of the first acts of the American republic following the establishment of its new constitutional government. Originally set at 50 cents per ton for imported goods carried on foreign ships, and reduced to just 3 cents per ton for goods transported by American vessels, these tariffs were essential in providing critical revenue for the fledgling American republic. The rates were kept low enough to allow for the continued importation of finished European goods, which were still necessary for American markets. At the same time, they not only helped fund the federal government during a crucial period of nation-building but also served as a vital tool for encouraging the growth of American shipping and trade.

This successful implementation of a tariff regime is often brought up in conservative circles by those seeking to reduce government reliance on the current income tax system. However, the global economic environment is fundamentally different today than it was at the turn of the 1800s. For better or for worse, usually much worse, consecutive American governments have welcomed foreign manufactured goods with little to no tariffs in the name of free trade.

This has created a situation in which investments for capital-intensive manufacturing, such as the manufacture of planes and heavy equipment, have flowed to the United States, while manufacturing for non-durable finished goods has fled to regions with the lowest labor costs, usually East Asian countries and China in particular. The limited supply of disposable medical equipment of all types in the United States during the pandemic is a highly important piece of evidence regarding the disastrous consequences of this policy of free trade.

Chinese manufacturers were quickly able to ramp up production of masks, gowns, and the myriad of other equipment and supplies required for treating COVID-19 patients. As a country, the United States was simply unable to do so. Early in 2020, then New York Governor Andrew Cuomo desperately begged entrepreneurs to start factories in his state, and offered state funds to support people willing to do so.

Needless to say, targeted tariffs are the proper prescription for our current economic situation. Frankly, the increased revenues for the federal government are a fringe benefit when compared to the protection that tariffs provide to domestic manufacturing.

The current approach to tariffs undertaken by President Trump seems to be anything but targeted, appearing more impulsive than part of a carefully developed strategy. This approach risks damaging the relationships the United States has with its neighbors.

The United States and Canada share a unique and deeply intertwined relationship, both economically and socially. Socially, roughly 75% of Canadians live within 100 miles of the American border, creating a natural connection between the two nations. In 2023, Canadians accounted for 30% of all tourist entries to the United States, highlighting the robust movement between the countries. The two nations share a common language, largely participate in the same sports, and often consume the same television shows and movies, which fosters a shared cultural landscape.

Economically, the relationship between the United States and Canada has been shaped by mutual interests and long-standing cooperation. Both countries enjoy high standards of living, and while Canadian labor tends to be less expensive, the difference is not excessive. The roots of this economic partnership can be traced back to the early 19th century, with the Reciprocity Treaty of 1854, which established the first significant free trade agreement between the two countries, focusing on goods such as timber, fish, and agricultural products. This treaty laid the foundation for the economic ties that continue to shape trade between the U.S. and Canada today.

Over the years, there has been substantial cross-border cooperation on various matters of standardization, even in areas such as product safety and labeling. This cooperation has been essential for facilitating trade, as both countries work to ensure that products meet common standards, making it easier for goods to move seamlessly across the border. For example, Canadian food products can be exported to the United States with minimal barriers, and the reverse is also true, thanks to the regulatory alignment between the two nations. This mutual collaboration has been critical in maintaining a strong economic relationship, allowing merchants and manufacturers in both countries to thrive in a globalized world.

This historical closeness can explain the strong negative response when President Trump announced tariffs on Canadian goods.  Ordinary Canadians might have felt betrayed by their southern neighbors. After President Trump announced tarrifs on Candian goods, Canadian sports fans booed the American national anthem, and American products were pulled from store shelves in protest.

In Trump’s first administration, he renegotiated NAFTA into the USMCA. Now, in his second term, he is implementing harsh tariffs that are not allowed under the new trade agreement using emergency powers. His stated purpose was to pressure Canadian law enforcement to target illegal border crossings, including the trafficking of people and narcotics, particularly in Upstate New York.

It would be entirely dishonest to say there is no illegal flow of goods or people from Canada into the United States, but the scope and scale of illegal migration on the Southern border far outweighs what is happening in the North.

A large portion of illegal border crossings from Canada into the United States occurs in the Swanton Sector, which includes the northernmost parts of New York. This is partly due to the region's geography and partly because the close proximity of major Canadian population centers, such as Toronto and Montreal, makes smuggling easier. In the summer months of 2024, U.S. Customs and Border Protection (CBP) encountered 8,000 individuals illegally crossing the border from Canada into the United States in the Swanton Sector. This contrasts with the southern border, where hundreds of thousands of migrants routinely attempt to illegally cross into the United States.

Additionally, unlike the southern border, most illegal crossers at the northern border are of Indian descent, possibly drawn to Canada by its burgeoning tech sector. This isn’t to suggest that we should unconditionally welcome one group while zealously enforcing laws against another, but rather to highlight the difficulty of entering the United States illegally through Canada. The obvious requirement for migrants to first enter Canada— which only shares a land border with the United States—before crossing into the U.S. filters out those who solely rely on cartel human traffickers for logistics. It also limits a migrant’s ability to bring narcotics, such as fentanyl, into the United States in the future.

All of this is to say that the tariffs Trump is attempting to place on Canadian goods seem more like needless antagonism than something that could accomplish a goal. There will not be a significant reduction in illegal border crossings because there are already few illegal crossings. There will not be a great reduction in the flow of cross-border fentanyl, because so little fentanyl already crosses the border. Trade and relationships of all types, on the other hand, are at great risk of disruption if these new tariffs come into effect.

President Trump should rethink the use of tariffs against friendly countries before these relationships are damaged.