Shoppers line up to cross into the U.S. at Blaine

Retailers eye more tariff cuts to fight cross-border shopping

Baby clothes, sports gear a test to see if savings trickle down to consumers

Retailers are optimistic they can persuade the federal government to go further in eliminating import tariffs on many products, reducing the lure of cross-border shopping for consumers.

Retail Council of Canada vice-president Karen Proud said the retail industry is pleased Ottawa agreed in the March federal budget to cut all tariffs on sports gear and baby clothes, giving consumers a $76-million break.

But she said there’s apprehension other tariffs are going up three per cent on many products from countries like China and India, because Ottawa has bumped those nations back to a less preferential tariff rate.

That’s expected to drive prices up in many product categories, while the government collects an extra $330 million.

Worse, the change for China affects imports from other countries, like Bangladesh, which enjoys no tariff on exports to Canada because it’s underdeveloped.

Proud said a Bangladeshi clothing manufacturer that uses some material from China would no longer qualify for the zero tariff and would suddenly be charged 18 per cent.

“We’re working with the government now to identify where we still have concerns,” Proud said.

The aim now is to prove that eliminating tariffs on baby clothes and sports equipment, which were charged 2.5 to 18 per cent depending on the product, will work to help reduce cross-border shopping without a major impact to Canadian producers.

If it can be demonstrated that most of the savings of the tariff cut actually trickles down to consumers in the form of lower prices – and isn’t just carved off by either suppliers or retailers – the Retail Council of Canada will push for tariffs to drop on other product categories next year.

“Footwear is definitely right at the top of our list,” Proud said. “It’s kind of the poster child example for cross-border shopping.”

Because there are virtually no Canadian shoe manufacturers left, she said it “begs the question” of why there’s any tariff at all.

She cautioned shoppers shouldn’t expect to see all of a tariff cut flow through to them.

“Retailers have been taking a loss just trying to compete,” she said.

U.S. retailers typically pay much lower to no import tariffs on much of what they sell compared to Canadian outlets, accounting for part of the differential in prices across the border.