Trump: “They’re Taking Advantage of Us”. Really?

Does Trump Even Have an Understanding of Trade or the Deficit? NO. None.

Americans hear that line, and I’m sure, 95% of them, have no idea if it’s remotely factual. Okay, I get that. But when you don’t understand something, I should think the normal reaction for anyone would be to find out what it is I don’t know.

Trump, the Republicans and the media, certainly don’t want you to. Why?

Because, simply put, like the so called fentanyl problem for the immigration problem, it’s an abject lie.

Concerning fentanyl, Canada is responsible for somewhere in the order of .05% of the problem. As for immigration, Canada is responsible for less than 1% of the problem. But let’s face it, all of us, who live here, and those who live on the American side of the northern border knew that. What astounds me, is that because it serves a purpose of angering Americans who will only listen to a 15 second sound bite and react, — they will go with it and jump up and down like six year olds who had someone take back their cookie.

Did any Americans ask if the American drug consumption problem has something to do with American demand, or whether America’s drug problem is actually a problem for Canada? Last week, in one day, Canadian law enforcement seized more cocaine coming into Canada from the U.S., than all the fentanyl supposedly entering the United States, yet not a word from America.

How about the massive problem that American guns create in Canada? Last year, Canada’s police forces stated that 90% of the guns involved in deaths or injuries in Canada came directly from the United States.

Last year there was a firefight in Toronto between two gangs, — this is what Toronto police discovered,

“The Nov. 11 firefight stood out in a year of escalating gun violence in the city, with other episodes leaving dozens of murder victims in their wake. But almost overlooked was one striking fact: all 16 of the firearms seized by police after the shootout had been smuggled into Canada from the United States.

The weapons’ origins were no real surprise. Toronto police say about 90 per cent of the guns used in shootings, including those that cause injury and death, are now traced back to the U.S.”

So much for truth and facing the real issues in America.

Rationality and reason in the U.S. is extremely hard to find. Members of America’s congress actually still repeat this like a mantra, even though the facts are well known and obvious to anyone willing to check.

So let’s look specifically at the statement above.

“Canada is taking advantage of us.”

https://economics.td.com/ca-canada-us-trade-balance

Facts: Oh those Inconvenient Truths

• Canada is the largest export market for the U.S. and makes up one of the smallest trade deficits, owing largely to U.S. demand for energy-related products.
• Trade in the auto sector is balanced between the 2 nations. When President Trump has mused that the U.S. could replace Canadian auto exports with its own domestic supply, the highly integrated North American supply chains is a major complicating factor.
• Flipping the argument on its head, Canadian auto manufacturing has room to expand. Canada produces only 14 care models but consumes 325 models. The U.S. produces 121 models of the 328 models consumed in America.
• With respect to Trump’s assertions that the U.S. subsidizes Canada to the tune of $200 billion per year, it’s unclear where this number is derived. In any event, rather than a subsidy, the U.S. trade deficits is a by-product of U.S. economic performance related to the two countries.

So, what about Trump’s claim that the U.S. is subsidizing Canada by US$200 billion?

• It’s unclear where President Trump or his team derived this number.  In a recent press conference, he referred to it while discussing America’s “massive” trade deficit with Canada. Yet, it is roughly 4 to 5 times the officially reported statistics.  
• In any event, a trade deficit is not a subsidy. That would ring true, if for example, the U.S. government transferred US $45 billion annually to Canadian companies out of goodwill, but Americans are receiving value for the dollars spent in the form of goods and services. The trade deficit the U.S. runs with Canada reflects their economic outperformance and above-average spending of Americans, that’s driving a hunger for energy products.   
• Moreover, the greenback’s reserve currency status also creates massive demand for U.S. financial assets, which in turn allows the U.S. to finance its global consumption at a lower cost.
• It could very well be that President Trump is also factoring in other costs that the U.S. incurs. 
  • For example, the spending required to bring Canada’s defense spending to 3% of GDP as per Trump’s goal amounts to around US$45 billion.
  • But taking into consideration both the deficit and Canada’s military spending shortfalls still leads to a sizeable gap vis-a-vis the $200 bn estimate.
• On the other side of the ledger, often overlooked are the net benefits to the U.S. from Canada’s status as a reliable supplier of energy and other goods that are used for both domestic consumption and profitable investment opportunities¹. 

Energy accounts for all of the U.S. trade deficit with Canada

• The trade narrative shifts dramatically when trade flows are decomposed into energy and non-energy components.
• Last year, Canadian exports of energy products (oil, natural gas, power) to the U.S amounted to nearly $170 billion, or almost 1/3 of total shipments.  In contrast, energy accounted for only 6% of all U.S. imports. Put simply, Canadian sources are critical to U.S. energy security.   
• Remove Canadian energy exports from the equation and the trade story flips. Ex-energy, the U.S. enjoys a trade surplus with Canada of around C$60 (US$45 billion). (Chart 7)
• Canada’s trade advantage in energy has been rising steadily in recent years, most recently on the back of the Transmountain Pipeline Expansion (TMX) that, in turn, has sharply boosted Canadian oil exports to the U.S. west coast in addition to Asian markets. 
• Canadian crude is a key supplier to U.S. refining, predominantly in the mid-West, with a steadily growing share in the Gulf coast. Since many refineries are built to process Canadian sour, heavy crude, it’s difficult to shift away from that feedstock to alternative sources. This is true even from the U.S.’s Strategic Petroleum Reserve, which is largely comprised of conventional crude. Countries that could fill the gap are Mexico and Venezuela, but the latter would require lifting sanctions. Given Mexico already enjoys the second largest trade surplus with the U.S., this shift in demand would further widen that chasm, potentially allowing it to overtake China in the pole position. 
• If tariffs were extended to Canadian crude oil, it could lead to an immediate jump in U.S. gasoline prices of as much as $0.30-0.70 per gallon. One of the most price-transparent and inflation-sensitive areas for consumers is the movement in gasoline prices.
• Elsewhere, in 2023, Ontario also directly supplied electricity to 1.5 million U.S. homes and is a major exporter of power to Michigan, Minnesota and New York.   

Bottom Line

Some of the datapoints in this report may come as a surprise to readers. The bulk of the U.S. trade deficit with Canada is owing to energy. Outside of that, the scales tip into America’s favour. Even with this data, it’s proven insufficient to fend off trade attacks that will extend well beyond this current bout. In mid-2026, the USMCA comes under review. Regardless of the deals that will eventually be struck between countries, the lesson that should be learned in Canada is that there can be no guarantee against future tariff attacks.  

Final Thoughts

Since the U.S. is so angered by the fact that it doesn’t want to actually use facts, but irrational numbers thrown out like so much confetti, Canada does have an answer to what ails America. Canada will diversify its trading partners and send its oil and gas to nations that won’t manipulate trade in order to coerce or extort Canada for its resources, which is the actual reason that Trump is interested in holding Canada hostage to tariffs

The same strategy is why Trump wants to “impose peace” on Ukraine.

Canadians don’t take kindly to extortion. Threats and extortion result in alienation, in fact, they result in ostracizing the offender, in this case, America.

One thing is obvious, not just to Canadians. We are in a new era of multi-polarization. It’s time for Canada to move away from the U.S. currency, and build a permanent relationship with its trusted allies, Europe and the U.K.

This de-dollarization around the world, is going to create a seismic shift in economics and investment, away from the U.S. to Japan, and Europe. Canada will move with that emphasis and in addition, militarize while at the same time, building and systematically growing its trade with Europe, China and the E.U.

Canada no longer trusts, or wants to be a part of America’s future.

So, like Germany and its soon to be new Chancellor, Merz, Canada will move as quickly as possible to move away from the United States in every conceivable way, so that extortion is no longer a possibility.

Seeking a renewed relationship, including a massive increase in defence spending, to assist Ukraine and Europe will pull Canada evermore into the sphere of Europe and away from the U.S.

America is no friend to Canada, and no ally. Allies don’t threaten, especially to annex your country.

So America, — we’ll find new partners, — and as one of the most trusted nations on earth, we don’t have to look far for friends.

Good luck. Based on the means by which you’re ‘making America great again’, you should arrive in 1930 again in less than four years.

Meanwhile, we’ll be part of the EU and have forgotten all about how “great” America really was.