A prominent free-market think tank is urging Canadian policymakers to adopt an unconventional approach in the escalating Canada-U.S. trade war: stop retaliating against American tariffs. The Montreal Economic Institute released new research suggesting that counter-tariffs historically harm Canada’s economy more than they pressure Washington to change course.
The recommendation comes as Prime Minister Mark Carney’s government scrambles to respond to U.S. President Donald Trump’s aggressive use of Section 338 of the Tariff Act of 1930. The 50 per cent tariffs on numerous Canadian goods took effect on August 22, 2026, following the collapse of last-minute trade negotiations.
Think Tank Strategy: Outlast the Opponent
Vincent Geloso, a senior economist at the Montreal Economic Institute, authored the new research note challenging conventional wisdom about trade disputes. His central argument focuses on patience rather than immediate retaliation.
“When you’re in a trade impasse like the one we’re in with the U.S., what works is being able to outlast the other guy.”
Geloso emphasizes that timing and strategic patience ultimately determine success in prolonged trade conflicts. He believes that opportunities will eventually emerge to act effectively, but only if Canada doesn’t exhaust its economic resources through premature counter-measures.
Carney Government Announces Billions in Counter-Tariffs
Despite the think tank’s warnings, Prime Minister Carney announced counter-tariffs targeting $27.6 billion worth of American imports last week. These retaliatory measures are scheduled to take effect on September 8, 2026.
The Carney administration’s response reflects the political pressure facing Canadian leaders to demonstrate strength against U.S. economic aggression. However, Geloso’s research suggests this approach may ultimately backfire.
For Latino communities across Canada, the trade conflict carries significant implications. Many immigrant-owned businesses depend on cross-border trade, while consumer prices on everyday goods could rise substantially as the tariff war intensifies.
Lessons from the Great Depression Era
Geloso points to historical precedent to support his argument against retaliation. During the 1930s, the United States raised tariffs by an average of 20 per cent on more than 800 Canadian products under the same 1930 Tariff Act that Trump is currently invoking.
Liberal Prime Minister Mackenzie King and his Conservative successor R.B. Bennett both retaliated with counter-tariffs. Bennett proved especially aggressive, implementing matching counter-tariffs on roughly 30 per cent of U.S. exports to Canada.
“In the ’30s we did counter-tariffs. We actually did two rounds of retaliation, both of which did absolutely nothing.”
According to Geloso’s analysis, these retaliatory measures had no perceptible effect on the American economy or U.S. trade policy direction. Instead, the counter-tariffs inflicted substantial damage on Canada’s own economy.
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The Economic Cost of Fighting Back
The research note presents sobering statistics about Canada’s losses during the Great Depression. Geloso estimates that falling prices for goods Canada sold to other countries caused approximately half of Canada’s economic losses during that period.
Counter-tariffs served as a key driver of this devastating effect, according to the economist’s findings. The retaliatory measures disrupted trade relationships and contributed to the price collapse that devastated Canadian exporters.
For modern Canada, these historical lessons carry significant weight. The Canadian economy remains deeply integrated with American markets, making it particularly vulnerable to prolonged trade conflicts. Latino entrepreneurs and workers in trade-dependent sectors face heightened uncertainty.
Political Change: The Historical Solution
Geloso’s research identifies what actually resolved the 1930s trade impasse: a change in American government. Democrat Franklin Delano Roosevelt won a massive electoral mandate in the 1932 presidential election, fundamentally shifting U.S. trade policy.
Roosevelt signaled his commitment to open markets by naming Cordell Hull as his first Secretary of State. Hull was known as a free-trade evangelist, making the appointment a powerful statement.
“Naming Cordell Hull in that position was about as radical of a pro-free trade signal Roosevelt could have sent at the time.”
This historical precedent suggests that Canada’s best strategy may involve waiting for political shifts in Washington rather than engaging in economically damaging retaliation.
The implications for Canadian trade policy are significant. If the Montreal Economic Institute’s analysis proves correct, the Carney government’s planned counter-tariffs may ultimately harm Canadian workers and businesses without achieving their intended goal of pressuring American policymakers.
Latino community members working in manufacturing, agriculture, and cross-border commerce should prepare for continued economic turbulence. The trade war’s effects may persist regardless of Canada’s response strategy, but the duration and severity of economic pain could depend heavily on Ottawa’s choices in the coming weeks.
The debate over retaliation versus patience reflects broader questions about Canada’s economic sovereignty and its relationship with its largest trading partner. As September 8 approaches, policymakers, business leaders, and workers across Canada await the consequences of whatever path the government ultimately chooses.
What tariffs has the U.S. imposed on Canada in 2026?
President Donald Trump used Section 338 of the Tariff Act of 1930 to impose 50 per cent tariffs on numerous Canadian goods. These tariffs took effect on August 22, 2026, after trade negotiations collapsed.
How is Canada responding to U.S. tariffs?
Prime Minister Mark Carney announced counter-tariffs on $27.6 billion worth of American imports. These retaliatory measures are scheduled to take effect on September 8, 2026.
Why does the Montreal Economic Institute oppose counter-tariffs?
Senior economist Vincent Geloso argues that counter-tariffs historically failed to change U.S. trade policy while causing significant harm to Canada’s economy. His research examines the 1930s trade war as evidence.
What happened when Canada retaliated during the Great Depression?
Canada implemented two rounds of counter-tariffs in the 1930s, with Prime Minister R.B. Bennett placing matching tariffs on 30 per cent of U.S. exports. According to the research, these measures had no effect on American policy but damaged Canada’s economy.
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