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When the media talks about a trade war, the discussion usually focuses on tariffs.
The United States puts a tariff on Canadian steel. Canada responds with a tariff on American products. Then economists calculate how much prices might rise and which industries are going to be hurt.
But tariffs are only one weapon in a trade war.
There is another form of competition taking place that gets far less attention, and it may ultimately have a much larger impact on where companies decide to invest.
Yesterday, the Canadian government announced what it calls the Productivity Mega Deduction. The proposal would allow businesses to immediately expense a much broader range of capital investments acquired after September 15 of this year.
Instead of buying a piece of equipment and depreciating it gradually over many years, businesses could deduct the entire qualifying investment immediately.
The United States has long had an advantage in this area through bonus depreciation.
Canada is now effectively responding with its own version.
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