Jim Stanford is economist and director of the Centre for Future Work in Vancouver, and author of the recent report “Who’s Subsidizing Whom? Myth and Reality about the Canada-U.S. Trade Balance.”
Trump claims that the bilateral U.S. deficit in merchandise trade with Canada amounts to the United States “subsidizing” Canada. This claim has no economic merit whatsoever. Trump literally makes up numbers and ignores fundamental precepts of economic theory. In reality, the United States benefits from the bilateral relationship at least as much as Canada does.
1. Canada is the largest market in the world for U.S. exports. We purchased $440 billion of U.S.-made goods and services in 2023.
2. The Canada-U.S. trade relationship is among the most balanced of all major U.S. trading partners. The United States sells 92 cents of exports to Canada for every dollar it imports from Canada — compared with less than 80 cents in its overall global trade.
3. The bilateral deficit with Canada ranks 10th among U.S. trading partners, accounting for only five per cent of the total U.S. trade deficit.
4. Trump’s claim the bilateral deficit is $200 billion is an utter fabrication. The bilateral deficit was US$40 billion in 2023, according to U.S. data, down 29 per cent from 2022. It fell another nine per cent during the first nine months of 2024.
5. Compared with a two-way trade flow of almost US$1 trillion per year, this imbalance is puny.
6. The United States enjoys a strong surplus in services trade with Canada, which offsets much of the deficit on merchandise trade and is only partially reflected in official trade statistics. Trump never mentions this.
7. The United States also enjoys a net surplus on investment income flowing out of Canada (C$13 billion in 2023). This further offsets the impact of the trade deficit on the overall U.S. balance of payments.
8. Most Canadian exports to the United States are unfinished inputs that U.S. businesses use in their own production — more so than with other trading partners. Tariffs would thus increase costs of these inputs (including raw materials, supplies, parts and semi-finished goods), reducing the competitiveness of U.S. firms (including in export markets).
9. Canadian energy (including oil, gas, coal and electricity) made up 60 per cent of the total bilateral merchandise trade deficit over the last decade. Having access to a secure and lower-cost energy source is a major benefit for U.S. businesses and consumers. (Stanford, 2025)
The economic facts and history between Canada and the United States may not be a sufficient argument for Donald Trump. David Frum comments that the 37th President of the United States has had interests in and misunderstanding of tariffs for a long time.
David Frum, author and staff writer for The Atlantic, explains on CBC the House why, of all the policies Trump has flirted with over the years, the incoming president is so wedded to the idea of tariffs and how Canada should prepare itself for a possible trade war.
Knowledge of the facts of the nature of trade between Canada and the United States may not be the way to convince President Elect Trump to abandon tariffs.
References
The House with Catherine Cullen. (n.d.). CBC. Retrieved January 18, 2025, from https://www.cbc.ca/listen/live-radio/
Stanford, J. (2025, January 13). Who’s Subsidizing Whom? Centre for Future Work. Retrieved January 18, 2025, from https://centreforfuturework.ca/2025/01/12/whos-subsidizing-whom/
