Welcome to Need to Know, The Hub’s twice-weekly roundup of expert insights into the biggest economic stories, political news, and policy developments Hub readers need to be keeping their eyes on.
The new tariff hikes would increase the effective tariff rate by less than 1 percentage point
By Joseph Steinberg, professor of economics at the University of Toronto
Unless Prime Minister Carney manages to strike a last-minute deal with President Trump, U.S. tariffs on Canadian exports will rise from 25 percent to 35 percent tomorrow, but the short-term impact is likely to be negligible. That’s because the CUSMA, the free-trade agreement that was negotiated during President Trump’s first term, is still in effect.
When the U.S. imposed 25 percent tariffs on Canada and Mexico in March, it exempted exports that comply with the CUSMA’s rules. Proving compliance can be costly, especially for products with complex supply chains, and so many exporters didn’t bother when U.S. tariffs were low; when Trump took office in January, only a third of Canadian exports were CUSMA-compliant. Virtually all products are eligible, however, and compliance has increased dramatically in recent months.
In May, the effective U.S. tariff rate on Canada—calculated as the total dollar value of tariffs collected divided by the total export value—was 1.9 percent, which implies that about 90 percent of Canadian exports by value were exempt. In some sectors like oil, where proving CUSMA compliance is straightforward, exports face no tariffs at all, just as they did a year ago.
President Trump’s administration has indicated that CUSMA-compliant exports will continue to be exempt from tariffs if the headline 35 percent rate goes into effect. Given the current rate of compliance, this would increase the effective tariff by less than 1 percentage point. The true increase is likely to be substantially less than that, because steel and aluminum, which make up the bulk of non-exempt exports, already face an even higher sector-specific tariff of 50 percent.
Graphic credit: Janice Nelson.
Regardless of whether a last-minute deal is reached, Canada will still face a much lower effective tariff rate than any other country. In the short term, the CUSMA exemption will give Canadian exporters an advantage, as U.S. importers look for alternative suppliers for European and Asian products that have become significantly more expensive.
However, with the CUSMA up for renegotiation next year, it also poses an immense longer-term risk. President Trump will undoubtedly try to force some significant concessions from the prime minister to keep the free-trade agreement intact.
Sean Feucht’s political theology may not be your cup of tea, but that hardly means we should limit his speech
By Brian Dijkema, president, Canada at Cardus, and senior editor of Comment
Before last week, I had no idea who Sean Feucht was. Thanks to a sudden rush by Parks Canada, the National Capital Commission, and several municipal governments to yank his concert permits, though, now I know all about this fellow. Every cancellation came as a “security” decision, with officials claiming to be concerned about the safety of people in public spaces where the concerts would happen. Yet, these safety concerns only came up after some folks loudly complained that Feucht was a Trump-aligned activist who fuses his Christianity with American nationalism and that such views have no place in publicly owned spaces.
Safety, it turns out, had more to do with safety from bad ideas than anything else. This is where the problem begins. Governments in free societies should not police ideas, much less religious expression, even in parks or government-owned concert venues. The officials who fined the Montreal church that hosted him should know better, and so should those defending the fine; it’s shameful and unconstitutional.
To be clear, Feucht’s mixture of Christianity with nationalism is deeply wrongheaded and, as a Christian who is taught to “not put your trust in princes,” and who sees all ideologies, including nationalism, as a form of idolatry, I’d love to talk with him publicly about why he’s theologically wrong and how he could make a better case for his faith in other ways. I would never attend his concerts, and I wouldn’t encourage anyone else to either.
Even so, Feucht doesn’t, to my knowledge, incite violence, support terrorism, or engage in other criminal acts (unlike other gatherings we’ve seen of late that do, and yet escape any sort of state intervention). This means cancelling his concerts over his political views or religious expression is wrong and unacceptable.
