The Cost of Standing Up to Protectionism: Price and Welfare Impacts of Canada's 2018 Retaliatory Tariffs.

The article analyzes the extent to which Canada's retaliatory tariffs on $16.6 billion worth of U.S. goods in response to the 2018 U.S. steel and aluminum tariffs passed through to import prices and affected Canadian welfare. Using detailed Canadian import data and a triple-difference estimation strategy, it finds that, on average, import prices fully reflected the tariffs (complete pass-through), causing Canadian importers to bear the full cost, reduce imports of targeted U.S. products by about one-third, and incur welfare losses estimated at $464 million alongside $1.76 billion in government tariff revenues. However, product-level analysis reveals significant heterogeneity: about 12% of products exhibited incomplete pass-through (U.S. exporters absorbed some tariffs), 13% showed tariff under-shifting (prices fell), and 28% experienced tariff over-shifting (prices rose more than the tariff). The study concludes that while Canada's retaliatory tariffs generated substantial costs for importers without terms-of-trade gains on average, some targeted products did yield positive terms-of-trade effects, though Canada's relative market size for these products was not a significant predictor of pass-through variation.