The United States’ latest wave of tariffs may be framed as a way to protect American jobs and industries, but one of Canada’s top economists says they’re also serving a quieter, crucial purpose:

raising money . Paul Beaudry, former deputy governor at the Bank of Canada , said Washington’s tariff strategy under Donald Trump sets out to do two things: tell Americans he cares about their jobs and raise hundreds of millions to pay for tax cuts.

“Yes, the tariffs are about generating revenue,” he said. “It’s kind of like a dual strategy — we’ll get it on one side or the other. If we don’t divert much trade, we get all this revenue. If we divert a lot of trade, we get fewer imports, but maybe more jobs. That’s the kind of mix they have in mind.”

Beaudry said tariffs are effectively a tax on imports , which makes them one of the few politically viable ways for the U.S. government to collect new revenue without calling it a tax hike.

“In budget negotiations in the U.S., it’s really hard to find anywhere you can tax. If you discuss any other tax, you’d be dead in the water right away,” he said. “This is one where they don’t present it as a tax, but it is a tax on imports. And it’s one of the few that can generate revenue while still getting support from their base.”

The issue is creating ongoing friction with Canada and other countries trying negotiate new trade deals with the U.S., but the Trump administration is keen to maintain tariffs on many goods for their revenue potential.

“I do think that will make negotiating things in the future harder,” Beaudry said, pointing to

U.S. tariff measures that include duties of up to 10 per cent on goods from the United Kingdom and as high as 15 per cent on certain imports from the European Union.

A 10 per cent universal tariff would raise US$2 trillion and a 20 per cent universal tariff would raise US$3.3 trillion from 2025 through 2034, according to the Tax Foundation, a Washington, D.C.–based nonprofit think tank that researches tax policy in the U.S. and abroad.

On the flip side, the organization estimates respective 10 per cent and 20 per cent levies would increase taxes on U.S. households by $1,253 and $2,045 on average, respectively.

Beaudry said most of the cost of tariffs right now is being borne by U.S. companies, not foreign exporters.

“What seems to be the case is most of the goods are coming in at a similar price as before,” he said. “That means someone in the U.S. is paying the tariff — firms are absorbing it in their margins rather than passing it directly to consumers. They’re doing it slowly because they don’t want to be on Trump’s bad side.”

Beaudry expects a few new manufacturing jobs to emerge — particularly in the auto sector — but doubts the tariffs will lead to large-scale job creation.

“(Trump) will get a few jobs and make a big case about it,” he said. “But mostly, he’ll get the revenue.”

Looking ahead, Beaudry said he expects some tariffs — especially extreme ones such as a proposed 100 per cent levy on Chinese goods — to eventually ease. But he also expects others, particularly on Canadian- and other foreign-made automobiles, could last.

“I’d be very scared in the car industry,” he said. “That’s one area where (Trump) wants to see more production in the U.S. and may keep tariffs in place for a long time.”

Just last week, Stellantis N.V. announced plans to shift production of the Jeep Compass from its Brampton, Ont., assembly plant to Illinois. The move is part of a broader US$13-billion investment in its U.S. operations.

Beaudry contrasted Canada’s dependence on global trade — roughly 40 per cent of the economy — with the U.S.’s much lower reliance at about 15 per cent. That difference, he said, helps explain why Washington can afford to use tariffs as a political and fiscal tool without triggering the same level of economic disruption seen elsewhere.

“The U.S. just doesn’t rely that extensively on international trade,” he said. “For them, tariffs like this don’t affect the whole economy the way they would for us in Canada.”

Beaudry said Canada should prepare for a tougher trade environment and the possibility that small but permanent tariffs — perhaps five per cent to ten per cent — will become a new normal.

“I wouldn’t be surprised if there’s an across-the-board smaller tariff that sticks,” he said. “Exactly for the revenue; and the idea that they want tariff revenue from all sorts of countries around the world.”

  • Why strategic agility is the only real hedge against ‘America First’ turbulence
  • Quebec layoffs at U.S. truck plant days before tariff spur calls for urgent action