What did Canada tariff before the trade war with the U.S.?

Since U.S. President Donald Trump first threatened to place massive tariffs on Canadian goods, the country has been embroiled in a whirlwind back and forth with its biggest trading partner.

Against this backdrop, China has slapped new tariffs on certain Canadian goods, and at least one other long-standing trade squabble has been pushed back into the spotlight.

Here's a quick look at how tariffs are set under normal circumstances, why some of them (under certain conditions) can skyrocket, and why New Zealand is unhappy. 

Tariffs are governed by the Customs Tariff Act, which sets a general rate of 35 per cent for goods entering Canada. This may seem high, but this baseline rate is almost never used. 

This is because Canada, along with more than 160 other countries, is part of the World Trade Organization (WTO), and all WTO members have "Most-Favoured-Nation" (MFN) status when trading with each other.

All of Canada's key trading partners are WTO members and they pay lower MFN rates — which vary from product to product.  The rate can be even lower if the two countries have their own trade agreement.

"Whether it's multilateral or bilateral with other WTO members, you're allowed to reduce that MFN tariff to something lower, either a lower duty tariff or a no duty tariff," said Martha Harrison, an international trade lawyer.

For example, the MFN rate for certain railroad axles is 9.5 per cent, but Australia and New Zealand pay just two per cent, because of separate agreements. 

Under the Canada-United States-Mexico Agreement (CUSMA), 98 per cent of goods entering Canada from the U.S. have no tariffs – or at least, they didn't before the trade war. 

Many goods can enter Canada tariff-free under MFN status, but Canada places higher default tariffs on some products. Our MFN rate for clothing products averages around 18 per cent, which is partly to help domestic producers compete fairly, but also in the hope of lowering the number of products made under poor labour conditions entering Canadian markets, Harrison says. 

But when it comes to the dairy industry, tariffs get a little more complicated.

Canada uses "supply management" policies for certain agricultural products to control prices, maintain food safety standards and protect the dairy, egg and poultry industries from foreign competition — policies which have long irritated trade partners such as the U.S. and New Zealand, another big dairy producer. 

The policies aim to limit how much of each product — butter, cheese, ice cream, eggs, etc. — can be imported. Importers apply for a percentage of the quota, and are able to bring in that quantity with no tariffs.

Trump has claimed Canada is "ripping [the U.S.] off" by putting tariffs of over 200 per cent on dairy products.