If tariffs are looked at like taxes, Donald Trump’s escapades are raising the bill by about $1,000 (Cdn.) a year per U.S. household these days.
Low-income Americans are feeling it more than high income-earners.
And that was the math before the latest escalation with Canada, according to analysis done by the non-partisan Urban-Brookings Tax Policy Center based in Washington, D.C. That bill is definitely not going down unless tariffs do.
Over at the Tax Foundation, another Washington-based think tank, their calculations set the average tariff-related tax increase at about $840 (U.S.) per household this year, or $1,157 (Cdn.), for 2026.
But they also note that U.S. tariff policy has changed more than 50 times since Trump became president. The uncertainty is costly too.
How much are tariffs costing American households
There’s a good reason U.S. tax-policy researchers are now in the tariff modelling business. Tariffs are meant to nudge economic behaviour and raise government revenue — just like other taxes.
Despite all the noise around Trump cutting taxes through the One Big Beautiful Bill Act signed into a law just over a year ago, for many Americans, taxes feel higher. At the same time, reports of budget cuts to health, research, education and universities abound.
And so when Canada goes about confronting the trade war that is now upon us in full force, we need to keep that in mind.
“Canada should not try to emulate the U.S.,” argues Charles St-Arnaud, chief economist at Servus Credit Union in Alberta. “We are too structurally different for that.”
Why Canada shouldn’t copy America’s fiscal playbook
Canada is redefining its competitive advantages in real time and for the long haul — reassessing supply chains, re-evaluating its customers, re-examining where the rest of the world will see our economic value-added. We are engaged in a frantic global contest for investment. St-Arnaud figures Canada needs between $1.2-trillion and $2.3-trillion over the next decade just to tread water. Much more if we actually want to redirect our economy toward the world beyond the U.S.
And like in so many other areas where we have previously defined ourselves in comparison to the U.S., it’s time to change our vantage point.
We don’t have to be just like them. Really.
In fact, we would be wise to head in the opposite direction, especially when it comes to fiscal policy. The frequent reference to Canada being overtaxed and therefore outcompeted by Americans is getting tired. They are in rough shape on the fiscal front, and we are not.
The bond market tells us this story.
Market players have balked at the amount of money the U.S. owes, and they’re demanding a premium. U.S. debt is more than $40-trillion, the deficit is about six per cent of GDP, spending on the Iran war and elsewhere continues unabated, and now 10-year Treasury yields are now approaching five per cent. Returns on some bonds are the lowest they’ve been in 100 years, and panic is in the air.
During financial crises of the past, investors have flocked to the U.S. bond market in a “flight to safety.” No longer. Even eye-popping efforts by the U.S. Treasury to buoy up the market have had limited effect.
The jitters spread to Canadian markets, of course. But here, the debt, deficit and spending patterns are predictable and fairly manageable.
That’s a key competitive advantage for Canada with borrowing costs here dramatically lower than in the U.S. and among the lowest in the G7. While storylines in the bond market are complicated and can send mixed messages, there’s no doubt that Canada’s stability is a selling point.
“This gives Canada a significant borrowing cost advantage and that advantage matters,” say economist Don Drummond and research officer Nicholas Dahir in a recent paper for the C.D. Howe Institute. “It lowers borrowing costs for businesses at a time when Canada sorely needs stronger investment and productivity growth.”
For sure, Canadian businesses need to find new ways to sell their goods and services into new markets, including the U.S. And our collective ambitions as a nation will require trillions in new investment, plus a fresh new pitch to financiers around the world.
Business investment and productivity gains have been worrisome in Canada in recent years, stuck in a lull that is hard to turn around. Access to capital is difficult for many young, innovative firms. Those are major challenges and are the central focus of the summit that Prime Minister Mark Carney is convening with global investors on Sept. 14 and 15.
But copying America is not the way to meet the moment.
In some cases, they have lower taxes than us; in other cases, they do not. But to clamour for matching without a full appreciation of what the costs and benefits are for Canada is to ignore the fiscal mess that is America, and glosses over the specific pros and cons of the Canadian economy as it retools.
Other small, open economies have figured out how to be competitive and maintain a tax system that supports solid social programs at the same time, Arnaud points out.
We can do that too.
