Will We Get Price Relief or a Canadian Trade War?

: Veronique De Rugy on Sep 3, 2026

I will never understand why President Donald Trump, brought back to office partly in response to a sharp rise in prices during the Joe Biden interlude, would pursue the expensive tariff policy we've been subjected to since the beginning of 2025. And yet here we are, with another reason to be unhappy about inflation and the cost of living.

Sadly, the administration's response to the pressure is as erratic as its tariff policy.

On one hand, Trump lowered tariffs to bring down the price of beef, effective this week. The White House acknowledged the link between tariffs and higher prices by explaining that the cost of beef has risen "unreasonably" and that the remedy is to temporarily import more of it at a lower tariff rate. Experts expect the 300,000 metric tons of relief to come largely from South America.

Apparently, though, this economic lesson has not traveled very far. As Trump liberalized the market for beef, he also imposed new 50% tariffs on some $20 billion worth of Canadian goods, once again behaving as though buying from our closest neighbor is a detriment to U.S. consumers. Canada is retaliating in kind against American exports beginning Sept. 8. Products caught in the escalating trade war include steel, aluminum, dairy, appliances, agricultural equipment, pulp and paper, plastics and electronics.

Economic war with Canada not only reminds the American people of a policy they hate but runs counter to an affordability agenda. Research on the effects of Trump's tariffs continues to surface and offer clarity.

Take the most recent paper by economists at the Federal Reserve Bank of New York and Columbia University. Mary Amiti, Sebastian Heise and David Weinstein looked at who shoulders the cost of the tariffs, examining which part of the tariff reaches consumers through higher prices versus which share of the price hike is due to other factors. The group estimates that a 10% tariff on all imports will raise U.S. consumer prices by about 2.6%. Roughly two-thirds of the increase comes quickly and directly from the tariff being passed on to customers at the border. The remaining third of the price hike shows up more slowly in American-made goods.

Let me repeat that: Raising tariffs on foreign goods also raises the prices of American-made goods. This happens partly because domestic producers pay more for imported parts and materials. But it also occurs because domestic producers, facing less competition, often raise their prices simply because they can.

This is only the latest study to knock out protectionists' three main claims at once.

The first claim is that "foreigners pay the tariff." It's hard to deny that the pass-through of costs collected at the border to U.S. consumers amounts to anything less than a tax.

Some intellectually honest protectionists concede as much. In fact, it's what they want. They prefer a second claim: that higher import prices will push American consumers to switch from foreign goods to American goods. That may be. However, we can't actually avoid an import tax that shows up in domestic prices and fatter markups. Buying American doesn't actually shelter us from higher prices.

The third claim is that tariffs help American manufacturing as a whole. But for the average firm facing higher costs for both foreign and domestic inputs, tariffs do little.

What's left is a tariff working exactly as designed: a hidden, unavoidable import tax that makes everything imported more expensive, hands government-favored firms pricing power at the expense of consumers, and taxes the domestic production it claims to defend. Citing Yale University's Budget Lab, The Washington Post's Ramesh Ponnuru points out that "Trump's tariffs are costing American households an average of $1,100 a year."

Unfortunately, because the prices of domestic goods take months to rise, the affordability crisis is still developing.

It's not as if we don't know what would help. The administration's beef policy inadvertently acknowledges the argument for free trade. Now, apply that insight consistently.

If you want cheaper houses, do not make Canadian lumber more expensive. If you want more affordable cars and appliances, do not tax steel and aluminum inputs. If you want American manufacturers to compete, do not make them pay more for intermediate goods. And if you want American exporters to prosper, do not repeatedly provoke America's trading partners into retaliating against them. In short, remove the tariffs.

Veronique de Rugy is the George Gibbs Chair in Political Economy and a senior research fellow at the Mercatus Center at George Mason University. To find out more about Veronique de Rugy and read features by other Creators Syndicate writers and cartoonists, visit the Creators Syndicate webpage at www.creators.com.

----