Economist Warns of Economic Damage as Tariffs on Canada and China Loom

(KNSI) – A local economist warns that there will be economic damage should a trade war break out.

Twenty-five percent levies on general goods from Canada and Mexico could go into effect within a month, as could a 10% tariff on Chinese products. St. Cloud State University Professor King Banaian is questioning how long such an economic standoff can last. Normally, Canada would allow its currency to weaken to make goods more attractive to American buyers to offset the effect of the tariff. With inflation already running high, that may not be possible.

Banaian notes, “There is economic discontent in Canada with their government with higher prices, particularly on food, just like here in the United States.”

If Canadian tariffs go into effect, Banaian gives two industries that will be most affected. “Lumber would be a significant issue here in the United States. You’ve got rebuilding going on from hurricanes in the southeast from the fires in the Los Angeles Basin, both of those would be impacted by that. You also will see significant impact on the automobile industry.”

Banaian says cars have morphed into a North American industry with production facilities in Mexico and Canada becoming highly specialized. He believes it will take significant time to bring that manufacturing back home.

The standoff will also likely highlight the effects of already existing trade protections. Canada has significant curbs on U.S. dairy products, an industry that is prevalent in Stearns County. Tariffs on dairy can be as much as 270% for American-made milk, butter, and cheese. Given this week’s rhetoric from Canadian officials, it will be hard for those to remain in place going forward.

President Donald Trump says the sanctions can be avoided if the countries take steps to curb fentanyl trafficking. Both Canada and Mexico have pledged to help, but only concrete actions will fully eliminate the issue. Banaian says that while tariffs are nearly universally condemned in modern economics, using them as leverage in international diplomacy is relatively new and could change how they are interpreted.

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