Trump’s Tariffs Could Turn Canada Into America’s Outlet Mall ... in a Good Way
Trump really has no idea what he is doing or the unintended consequences his actions are creating.
Will he blink?
As an economist, I find it hard to believe that Trump will go through with his Liberation Day tariffs — which come into full effect on Wednesday, 9 April. They will inflict huge pain on American consumers, and it will take months if not years for American industry to build replacement, and more-costly, supply chains.
I suspect he will blink and soon pause those tariffs, as he did repeatedly with Canada and Mexico.
But if those tariffs go into effect this week, they are going to supercharge a whole new wave of shopping tourism.
Let’s look at three examples.
1. Cross-border pharmaceuticals
There has been a long history of Americans crossing the border into Canada to buy pharmaceuticals at a lower price. (This article does an excellent job of describing how that works).
With foreign made pharmaceuticals (NYT gift link) allegedly next on the Trump hit list, tariffs could bring new life into the long-practiced custom of US residents crossing into Canada and Mexico to buy their medicines.
2. Discount iPhones abroad
Expect iPhones to shoot up in price by over 40% with the Trump tariffs. That, of course, is only for phones sold in the US, since other countries are not imposing the same tariff on goods from China.
Top of the line iPhones would be $700 cheaper elsewhere — including across the border in Canada.
I can imagine many Americans taking a September trip abroad to buy a new iPhone, which they can decide whether or not to declare at the border on their return.
You can see Americans jumping on a plane for certain types of consumer shopping. But where will they go?
A free trip to London when buying a new phone would be pretty enticing to many.
Heading north would be cheaper. But Canadian cities need to put themselves in the forefront of American’s minds as a better destination to buy those goods.
Smart Canadian cities will start marketing themselves as easy destinations for shopping holidays.
3. Cargo ships diverted at sea
And then there are going to be whole cargo loads at sea heading to the US that get diverted to other ports, such as in Canada and Mexico, as tariffs whiplash hits.
One example is illustrative. Taiwanese e-bike manufacturer, Tern Bicycles, is currently preparing a shipment for the US. But if that shipment is deemed that it left its origin too late, Tern US would be hit with a $1 million import bill, making the bikes too expensive to compete in the American market.
Rather than pay that bill, Tern is talking about diverting that cargo mid-trip to a Canadian or Mexican port. That sort of action could flood the market of the new destination — creating opportunities for retailers and deals for buyers.
Are Canadian retailers prepared to absorb, or capitalize on, these sort of shocks to the local market? Accessing those shut-out US customers will key. Expect to see all sort of new ways that Canadian retailers connect with American shoppers.
Agent of chaos
Trump revels in creating uncertainty for others.
No one wants that chaos, but it is going to create opportunities. Canadian cities and retailers should get ready to seize the moment.