OTTAWA - Canada is moving to shore up its domestic steel industry amid U.S. President Donald Trump's ongoing global trade war, with new tariffs targeting China and other countries around
First of all, supply and demand is not a concept bound by natural law, like physics or something. It’s a framework of understanding, not a hard and fast rule. For example, let’s say I’m selling something. It costs me $5 to produce each one and I sell them for $8 each.
A foreign producer comes along and sells the exact same item for $5 each because it costs them $2 to make. Now the market is flooded with this product, but mine cannot be sold for $5 or less (since it would be sold for either no profit or at a loss), so there is direct financial incentive to buy the foreign product.
By adding a tariff, the price of the foreign product becomes higher, artificially driving demand of the domestic product, the price of which generally cannot be lowered without damaging local industry. You can see this in retail markets as well with stores like Walmart and Dollarama, who price other stores out of the market due to their unbeatable prices, which are the result of Chinese manufacturing infrastructure and subsidies.
There is much less flexibility in pricing in heavy industries like steel manufacturing compared to retail, so it doesn’t really make sense for prices to fall significantly enough for Canadian companies to be able to compete with a manufacturing powerhouse like China.
First of all, supply and demand is not a concept bound by natural law, like physics or something. It’s a framework of understanding, not a hard and fast rule. For example, let’s say I’m selling something. It costs me $5 to produce each one and I sell them for $8 each.
A foreign producer comes along and sells the exact same item for $5 each because it costs them $2 to make. Now the market is flooded with this product, but mine cannot be sold for $5 or less (since it would be sold for either no profit or at a loss), so there is direct financial incentive to buy the foreign product.
By adding a tariff, the price of the foreign product becomes higher, artificially driving demand of the domestic product, the price of which generally cannot be lowered without damaging local industry. You can see this in retail markets as well with stores like Walmart and Dollarama, who price other stores out of the market due to their unbeatable prices, which are the result of Chinese manufacturing infrastructure and subsidies.
There is much less flexibility in pricing in heavy industries like steel manufacturing compared to retail, so it doesn’t really make sense for prices to fall significantly enough for Canadian companies to be able to compete with a manufacturing powerhouse like China.