CHARLEBOIS: Ottawa’s tariff trap — don’t weaponize the grocery bill

A counter-tariff may look patriotic in Ottawa. At the checkout, it is still a tax paid by Canadians.

Published Aug 23, 2026  •  4 minute read

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Canada’s trade negotiations with the United States have failed. Washington has imposed 50% tariffs on approximately $28 billion worth of Canadian products, and Prime Minister Mark Carney has promised a dollar-for-dollar response beginning Sept. 8.

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Retaliation may be politically inevitable. But Ottawa must proceed very carefully. In attempting to punish Washington, Canada could easily end up punishing Canadian families at the grocery store.

Tariffs are taxes. Full stop.

A Canadian counter-tariff is collected from the Canadian company importing the American product. The exporter may absorb some of the cost, but importers, distributors and retailers will inevitably pass part of it along. Grocery margins are already thin.

Eventually, the cost appears at the checkout.

We learned that lesson in 2025, when the Trudeau government imposed 25% counter-tariffs on a remarkably broad range of American products. The list included orange juice, peanut butter, coffee, tea, chocolate, rice, pasta, fruit, vegetables, poultry, dairy products, cooking oils, sauces and soups.

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Political theatre

It was political theatre masquerading as food policy.

A subsequent Bank of Canada study found that prices for tariffed goods increased by approximately 6% relative to comparable untariffed products. For tariffed food and beverages, the increase approached 8% at its summer peak. Retailers did not pass along the entire tariff, but consumers clearly paid part of it.

Most of those consumer tariffs were removed after six months, limiting the damage. This time, however, the retaliation could be broader, higher and more persistent. If food, ingredients, packaging and agricultural equipment are included, the combined cost could approach $200 annually for an average Canadian household. That estimate reflects not only direct tariff costs, but also the expense of changing suppliers, importing from more distant markets and operating a less efficient supply chain.

Lower-income households would be hit hardest. They have fewer opportunities to stock up, shop at several stores or buy in bulk. Food inflation is also cumulative. Canadians do not recover the purchasing power lost after years of higher grocery prices simply because inflation eventually slows.

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Food prices already 27% higher

Food prices are already roughly 27% higher than they were five years ago. Still, adding more pressure would be reckless.

There is also the risk of a price-umbrella effect. When an American product becomes more expensive, competing Canadian and foreign brands face less pressure to keep their prices down. Importers may replace nearby American suppliers with more distant sources, increasing transportation, warehousing and contracting costs.

The Bank of Canada did not find a statistically significant broad spillover to substitutes in 2025. That is reassuring, but it is no guarantee this time. The coming tariffs could last for years rather than months. The same research found that retailers passed along more of the cost when they believed tariffs would remain. Expectations matter.

Once companies conclude that a tariff is permanent, they renegotiate contracts, change suppliers, rebuild distribution networks and reset prices. Those costs can spread well beyond the products appearing on Ottawa’s retaliation list.

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This is why food must be spared.

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The final list has not yet been published, but dairy has already been mentioned as a potential target. That makes little economic sense. Canada already controls dairy imports through supply management and tariff-rate quotas. Additional tariffs would affect specialized American products and ingredients without necessarily creating meaningful political leverage in Washington.

Food-manufacturing ingredients should also be exempt, along with packaging, fertilizer, animal feed, refrigeration equipment, agricultural machinery and replacement parts. Tariffing these products would raise the cost of producing Canadian food. A product does not need to appear on a grocery shelf to increase grocery prices.

Ottawa should also resist the argument that food tariffs are harmless whenever Canadian substitutes exist. Restricting a lower-priced import reduces competition and gives domestic suppliers more room to increase prices. Canadian producers may benefit, but Canadian consumers can still lose.

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If Canada must retaliate, it needs a scalpel, not a sledgehammer.

Countermeasures should focus on non-essential goods with a low weight in household budgets, sufficient alternative suppliers and genuine political importance in the United States. Government procurement restrictions, investment screening and coordinated legal challenges should also be considered instead of relying almost exclusively on border taxes.

Four tests

Every proposed tariff should pass four tests. Is the product essential to Canadian households? Is it an input for Canadian production? Can it be sourced elsewhere without significantly higher costs? Will targeting it exert meaningful political pressure in the United States?

If a tariff increases Canadian food-production costs or grocery bills without creating real pressure in Washington, it has failed.

Trump’s tariffs are harmful because they raise costs, distort supply chains and weaken competitiveness. Canada should not reproduce the same damage at home simply to demonstrate resolve.

Retaliate if we must. But keep food — and everything required to produce it — off the tariff menu. The objective should be to pressure Washington, not weaponize the cost of living against Canadians.

– Sylvain Charlebois is director of the Agri-Food Analytics Lab at Dalhousie University, co-host of The Food Professor Podcast.

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