Image: Pixabay
As the tit for tat imposition of tariffs between Canada and the US escalates, people in the creative industries on both sides of the border must be wondering where this will end. The latest to get tangled up in this web are knitters. Yes, knitters—of woollen sweaters, baby booties, nose warmers etc. A couple of weeks ago I wrote about the impact on Canadian artists, since various categories of original art– paintings, drawings, collages, sculptures and statuary, original prints and lithographs—are included in the “Section 338” fifty percent US tariffs imposed in retaliation for Canada’s retaliation, particularly the provincial bans on the selling of US liquor and wine. But also included in the long list of Canadian products hit by US import tariffs is the following; “Wool, excluding unimproved, finer than 46s, greasy, shorn, not carded or combed”.[i]
Well, you say, how does that affect Canadian knitters? Sheep farmers, yes, but knitters? Well, according to this Canadian Press story, it has a big impact because Canada has hardly any facilities left to transform greasy wool into yarn. As we know once upon a time, in the horse and buggy era, all sorts of things got done locally; slaughtering cattle, cleaning wool, churning butter, milling wood. Then, with industrialization, international trade and the era of specialization and transportation, local production tapered off and supply chains sprang up linked to locations where economies of scale made production competitive. Rather than processing wool close by, Canadian producers sent their raw wool to factories in the US to be processed. It was more cost effective to do so because these factories were large and processed a lot of wool from a wide area. With an integrated North American market, the cost of transportation was minimal compared to the efficiency savings. There were no tariff impediments to crossing the border. Once processed, some of the processed Canadian wool came back to be feedstock for knitters in Canada (some of whom then produced products for the US market). It is a classic example of how international trade is supposed to work. But with the imposition of US tariffs on raw wool, Canada’s wool industry is now realizing the need to be more self sufficient. In the interim, Canadian raw wool is being sent to Europe or China for processing. Who wins? China. Who loses? US mills that formerly were processing Canadian wool and then exporting it back to Canada. And this is the tariff that is supposed to be punishing Canada! Talk about woolly thinking.
When governments start untangling supply chains, combing through protectionist options and ramming through changes, things begin to unravel. Having had the wool pulled over their eyes by the seductive siren of protectionism, they should have every reason to feel sheepish when they see the result of their actions. OK, enough puns. This is serious business. Not only is knitting a creative industry, sometimes on an industrial scale but also at an artisanal level, it is also related to copyright because of the intellectual property behind the patterns. In fact, I wrote an entire blog post on knitting patterns and copyright theft a few years ago.
The Trump administration has based its trade policy on forcing repatriation of production back to the US through the imposition of tariffs on imports. I don’t need to repeat the judgment of just about every economist in the world, except for Peter Navarro, who argue this is self defeating. The cost of import tariffs will be borne by US consumers, as is becoming increasingly evident. The disruption of efficient supply chains will hurt US manufacturing and US workers. This is an argument put forward by the auto industry where North American supply chains have become increasingly integrated as a result of NAFTA and its successor, the USMCA/CUSMA. But even in an industry like wool processing, the impact of impeding mutually beneficial supply chains is revealing.
The only result of the US policy will be to force Canada to become more self reliant and to redevelop its own wool processing industry. This will cause job losses in the US and probably increase the price of processed wool in Canada. It may result in the effective transfer of some jobs from the US to the new (less efficient) processing plants in Canada, but Canada will have gained some jobs and at least Canadian knitters will have a reliable supply of raw product, not subject to the whims of whoever happens to be in the White House. This is the sovereignty or security argument for protecting home-grown industries in contrast to the comparative advantage/greater efficiency rationale for open markets. The former seems more important these days as a result of the US underming the global trading system through its unilateral actions.
In a sense, the example of the negative impact on the US wool processing industry from ill-conceived tariffs on Canadian raw wool is very similar to the position that Canada created when it announced retaliatory tariffs on Canadian imports of US seafood. The immediate effect would have been to put out of work a lot of people in the New Brunswick riding of US-Canada Trade Minister Dominic Leblanc. New Brunswick and Maine have long had a close trading relationship. Maine lobsters are harvested earlier because they mature faster, having grown in slightly warmer waters. When lobsters are ready to be processed, there is a glut of them. Processing capacity is stretched. The solution devised over many years is to ship many Maine lobsters to New Brunswick for processing because there is excess processing capacity at that time of year. The processed US lobster then comes back to US markets. Everybody wins. The Canadian government, in its zeal to send a message to US exporters that tariffs are a two-way street–and that consequently they should start putting pressure on the Trump administration to repeal tariffs on Canada–almost shot itself in the foot. The Canadian tariff, devised by bureaucrats behind a desk in Ottawa who had apparently not bothered to consult people on the front lines of the Atlantic seafood industry, was rescinded a day after it was announced. Both sides need to lower the temperature as people, including artists, knitters, crocheters, lobster processors and many others, are getting hurt.
There is another example of backtracking on retaliatory tariffs that I cannot help but mention. After threatening Canada with Section 338 tariff punishment, the Trump administration quietly rescinded the additional tariff it imposed on imports of Canadian toilet paper. Who says Canada has nothing that the US needs! If Canada is looking at ways to strike back, putting an embargo on the export of this crucial commodity would rub a lot of US consumers the wrong way. But would it wipe away the damage?
The first shot in this trade war was fired from Washington. So far, the Trump administration has managed to hit just about every US consumer, US workers in car assembly and parts plants in the US that rely on an integrated North American industry, and now apparently workers in US mills processing raw wool. Of course, it has also hurt Canadian workers and producers, which was the intention. The inevitable Canadian reaction has also inflicted its share of economic pain on Canadian consumers, and US workers. Under current leadership in the US, it is hard to be optimistic that this is going to change anytime soon. In the meantime, “frogging” (look it up) an industry that has been knitted together for decades is yet another example of the self-defeating economic policies coming out of the current US administration.
© Hugh Stephens, 2026. All Rights Reserved.
[i] For clarification, the term “excluding unimproved” means that the tariff line includes wool from “improved”, i.e. bred sheep (like Merino or crossbreeds) whose wool is used for textiles. “Unimproved” in terms of tariff definition means wool that comes from wild or native sheep breeds that have very coarse, rough, and uneven coats. The increased tariff targets wool from live sheep that has not been processed, i.e. washed, carded or combed.
