The US-Canada trade war could push up these prices, analysts say
Flowers, hockey sticks and national flags stand among an array of products that may rise in price after a long-simmering dispute between the United States and Canada boiled over into a trade war over the weekend, some analysts told ABC News.
For now, U.S. levies apply to a sliver of Canadian exports, limiting the scope of price effects, but a tit-for-tat escalation threatens to deepen the pain for American shoppers, they added.
President Donald Trump on Monday said in a social media post that he will double tariffs on Canada-made cars and auto parts in January. The move came days after the U.S. imposed 50% tariffs on a hodgepodge of Canadian consumer products, including honey and whiskey.
After the initial set of U.S. tariffs took effect, Canada on Tuesday announced levies of its own, to take effect on Sept. 8, that would match the value of goods targeted by U.S. tariffs.
"This is a classic trade-war situation: Somebody puts on a tariff, another country retaliates dollar for dollar and then more tariffs are added," Campbell Harvey, a professor at Duke's Fuqua School of Business who studies commodity markets, told ABC News. "Then we get into this really bad equilibrium"
On Monday, Trump sharply criticized Canada for trade policies that he considers unfair toward U.S. products.
"On Trade, and in other ways, also, they are among the worst Nations in the World to deal with," Trump said on his social media platform on Monday. "They feel entitled, and yet, WE DON’T NEED CANADA, THEY NEED US!"
The rebuke arrived after Canadian Prime Minister Mark Carney issued blistering remarks about the U.S. approach to trade negotiations. He said talks broke down after American negotiators made requests that were unfavorable to Canada.
"They asked too much and offered too little," Carney said at a Saturday press conference.
The fresh round of 50% U.S. tariffs that took effect over the weekend applies to roughly $20 billion in Canadian exports, or about 5% of Canadian products sold in the U.S. each year, Harvey said.
The list of dozens of affected goods features food items such as dairy products, honey, whey protein and molasses, as well as alcoholic beverages like whiskey and vodka, according to documents issued by the White House. Other products include national flags, bedsheets, dishes, motorcycles, clothing and cosmetics, the documents showed.
Targeted products will face upward price pressure across the board but the extent of price increases will vary for each item, depending on the extent to which companies can replace it with an import from another country or a U.S.-made alternative, some analysts said.
"Importers will see increased costs and that will negatively affect their margins," Jason Miller, a professor of supply chain management at Michigan State University, told ABC News. "You can expect they'll have to increase prices to some degree."
In all, U.S. tariffs -- including recently issued levies on Canada -- will cost the typical American household $1,077 per year, according to an estimate released by the Yale Budget Lab on Tuesday.
The new tariffs from the U.S. on Canadian goods accounted for about $30 extra dollars per household per year, the group said.
Harvey, of Duke University, downplayed the extent of anticipated price increases as a result of fresh tariffs on Canadian products. A prolonged trade war could expand the set of products subject to tariffs and compound the strain on household budgets, he noted.
"The amount of trade that is targeted by these tariffs is small," Harvey said. "The impact on consumers will be very moderate."
"In the short term, it won’t be that noticeable but there are potentially very negative long-term effects," Harvey added.
The levies imposed over the weekend featured significant exemptions, leaving out some top Canadian imports such as oil, gas and potash.
The tariffs unveiled on Monday, however, appeared to ratchet up levies on a key Canadian export: Cars. The measure would double tariffs from 25% to 50% on cars, auto parts and trucks.
Sky-high tariffs on auto products could eventually drive up prices for shoppers, while weighing on employment in a major segment of U.S. manufacturing, Michigan State's Miller said. But, he added, the outcome will depend on how the potential tariffs are implemented.
Due to the manner of implementation for previous levies, the actual tariff rate paid for products such as Canada-made cars remains well below the level announced by Trump, Miller added, citing carveouts for some goods such as those compliant with the United States-Mexico-Canada Agreement, or USMCA, a free trade agreement.
The actual tariff rate paid for Canadian cars stood at 11.2% in June, the most recent month on record, U.S. Census Bureau data showed, despite a tariff rate of 25% touted by Trump.
"At some point, consumer prices will go up. But I don't think we're there now," Miller said. "We'll see where this goes."
