In a country like America, where economic strength and personal freedom are deeply intertwined, the principles of knowledge, wisdom, and practical business acumen extend beyond commerce—they play a critical role in spiritual growth and stewardship. True stewardship isn’t just about managing personal finances or business interests; it’s about understanding how economic decisions impact communities, industries, and even national stability.

Wisdom calls for discernment in trade and policy, while practical acumen demands the ability to navigate complexities—whether in a business deal or in the broader responsibility of ensuring prosperity for future generations. In this way, even something as seemingly technical as tariffs and trade negotiations can be viewed through the lens of stewardship, where ethical leadership, informed decision-making, and long-term vision align not only with economic sustainability but with a deeper moral and spiritual responsibility.

International trade is often misunderstood, particularly when it comes to tariffs and how their costs are distributed. Some argue that tariffs always get passed directly to consumers, while others claim they never do. The reality is more complex.

From a legal standpoint, U.S. Customs regulations (19 CFR) state that the importer of record—the party bringing goods into the country—is responsible for ensuring the accuracy of the transaction and paying all duties, taxes, and fees. However, how these costs are managed depends on negotiations between businesses across the supply chain.

Scenarios: How Tariffs Impact Pricing

Let’s say a U.S. administration imposes a 10% tariff on goods imported from Canada. There are several ways this could play out:

1. Full Cost Passed to Consumers
   • The Canadian supplier maintains its price.
   • The U.S. importer pays the 10% tariff and increases retail prices to offset the cost.
   • Consumers bear the full burden of the tariff.
2. U.S. Importer Absorbs the Cost
   • Instead of raising prices, the U.S. importer reduces its own revenue margin by 10%.
   • The consumer sees no price increase.
3. Canadian Supplier Reduces Costs
   • The Canadian producer lowers production costs by 10%.
   • They sell to the U.S. importer at a reduced price.
   • Even with the 10% tariff, the final cost remains unchanged.
4. Shared Cost Between Both Companies
   • The Canadian supplier and U.S. importer each absorb 5% of the tariff.
   • They find efficiencies to offset their losses—e.g., reducing manufacturing costs or optimizing transportation (which typically accounts for 8-12% of total costs).
   • Consumers either see no price change or only a slight increase.
5. Partial Cost Absorption with Minor Consumer Impact
   • Both companies split the tariff but also find additional supply chain savings (e.g., 3% reductions in production or logistics costs).
   • The consumer might only see a 4% price increase instead of 10%—or none at all, depending on the final adjustments.

Canada’s Highest Tariffs on U.S. Goods

Canada applies some of its highest tariff rates to dairy, poultry, and egg products under its supply management system, which includes tariff rate quotas (TRQs) and absolute quotas (ABQs):

Tariff Rate Quotas (TRQs)

• Dairy Products:
  • U.S. dairy imports within quota limits can enter Canada with low or zero tariffs.
  • Once the quota is exceeded, tariffs spike to 241%-277% (e.g., 277% on ice cream, 270% on certain milk protein substances).
• Poultry & Eggs:
  • Imports within the set quota face minimal tariffs.
  • Exceeding the quota results in tariffs up to 238% on chicken and over 200% on eggs and turkey.

Absolute Quotas (ABQs)

• Some products, particularly in the dairy, poultry, and egg sectors, are subject to absolute quotas.
• Unlike TRQs, which allow a certain amount of imports before high tariffs apply, ABQs completely restrict imports beyond a set limit, regardless of willingness to pay higher duties.
• These quotas act as an additional measure to control foreign competition and protect domestic industries by strictly capping the volume of specific imports.

While TRQs impose high tariffs beyond a set limit, ABQs go a step further by entirely blocking imports once the quota is reached. Both mechanisms function as tools to safeguard domestic producers from an influx of foreign goods, ensuring price stability and market protection for local industries. However, they also limit the ability of U.S. exporters to expand their market share in Canada, creating trade imbalances that often lead to renegotiation efforts.

Trade Agreements Evolve with Changing Circumstances

While President Donald Trump negotiated the United States-Mexico-Canada Agreement (USMCA) to replace NAFTA, no trade agreement is set in stone. Economic realities shift, industries evolve, and imbalances become more apparent over time. When an agreement disproportionately benefits one party or creates barriers that hinder fair competition, it becomes necessary to revisit and adjust the terms.

For example, Canada’s high dairy tariffs and restrictive quota system were points of contention during USMCA negotiations, yet they persist, continuing to limit U.S. exports. If these trade barriers undermine market access or create economic disadvantages, the U.S. has every right to challenge or renegotiate aspects of the agreement. Fair trade requires ongoing oversight, not just a one-time deal.

Moreover, global supply chains, inflation, and geopolitical factors can drastically change the economic landscape, making certain terms outdated or unfair. When agreements no longer reflect balanced trade, they must be reassessed. Just as tariffs and trade policies are tools for protecting domestic industries, renegotiation is a tool for ensuring long-term fairness and economic stability.

The Bigger Picture

Tariffs don’t automatically result in higher prices for consumers, nor do businesses always absorb them entirely. In reality, companies across the supply chain make strategic adjustments, negotiating costs to minimize impact. While media narratives often oversimplify the issue, real-world trade involves multiple possible outcomes, shaped by pricing strategies, operational efficiencies, and market competition. Similarly, trade agreements must remain adaptable to shifting economic landscapes to ensure fairness and long-term economic stability.