The federal government is hiking tariffs on 72 countries in order to help retire the deficit faster – a measure that will cost Canadian consumers $330-million more per year in higher prices.
The measure, contained in the 2013 budget, will mean higher prices for a variety of goods. It will take effect in 2015.
For some consumers, this hike will be partially offset by a measure that offers parents and sports enthusiasts a break by eliminating import tariffs on athletic equipment and baby clothes.
The government is raising tariffs on more than 70 developing countries because, it says, it believes they do not need the break on import duties anymore. The tariff increase will not apply to apparel or textiles. It expects to reap $330-million annually as a result of the change.
On the sports and baby clothing tariff cuts, Finance Minister Jim Flaherty served notice that he expects retailers to pass on the savings, calling the move a “test case.” He wants to see whether Ottawa can reduce a price gap between U.S. and Canadian retail prices where consumers in Canada end up paying more.
But the Conservative government’s new enthusiasm for free trade in sports gear has its limits.
The Tories are keeping in place a tariff on assembled bicycles to protect domestic bike assemblers and manufacturers. It’s an industry with a relatively large presence in Quebec including Minister of State for Small Business Maxime Bernier’s riding.
Most other imported sports equipment – and baby clothes – will be tariff-free as of April 1, Finance Minister Jim Flaherty announced Thursday. This is estimated to cost Ottawa $76-million in foregone annual revenue.
This includes tariffs on hockey equipment – which are 18 per cent for skates – as well as golf clubs, ski poles, clay pigeons, archery gear and snowboard boots. The rates of duty applied currently range from 2.5 per cent to 20 per cent.
The Conservatives are trying to demonstrate they’re sensitive to consumer anger over the fact retail prices remain stubbornly higher in Canada than in the United States despite the strengthened Canadian dollar.
A Senate committee report last month examined the price gap between Canada and the U.S. retail prices and urged Ottawa to cut tariffs that contributed to this differential. A Bank of Montreal study last year found that retail prices in Canada are about 14 per cent higher than those in the United States.
Asked why he limited the reductions to sports equipment and baby clothes, Mr. Flaherty called this a first step.
He described the tariff cuts as a pilot project to see whether retailers pass on the reductions to consumers. “The government, in consultation with the Retail Council of Canada and consumer groups, will monitor the impact of these tariff reductions on Canadian retail prices,” the government said.
The Conservatives say they could slash more tariffs if they like what they see.