In the long run, while U.S. protectionism will likely retreat from current levels, free trade probably isn’t coming back, says National Bank Financial Inc. (NBF) — highlighting the need for Canada to rethink its industrial policy.
In a new report, economists at NBF make the case that future U.S. governments will likely scale back the recent spike in tariffs, but they aren’t likely to tear down trade barriers to the levels that prevailed in recent decades — as politicians, and the industries that are protected by tariffs, will be reluctant to give them up entirely.
“Once tariffs are imposed, the industries that benefit typically lobby hard to keep them in place,” it noted. “These industries have a strong incentive to lobby for tariffs to be maintained: The financial rewards are concentrated and significant, while the higher costs are distributed across millions of consumers.”
Additionally, future administrations will be reluctant to give up the revenue generated by tariffs, as they are easier to maintain than it would be to pursue an alternative, such as a federal sales tax — and, future presidents will also cling to the vastly-expanded powers claimed for the executive branch by the current administration.
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