Canada vs US … who needs who?
A post on President Trump's "Truth Social" questioned why the US is subsidizing Canada by over $100 million. He likely meant $100 billion, as $100 million would be a very insignificant amount (0.01%) of the overall trade between the two countries. Trump raised some valid points about border security and military issues, but he is incorrect about trade. The US does not subsidize Canada, and there is no $100 billion trade deficit. According to the numbers of the USTR (United States Trade Representative), which tracks trade, the trading relationship between Canada and the US is actually fairly balanced, despite a 10:1 population ratio.
In 2022, trade between the US and Canada reached about $908.9 billion, making Canada the US's biggest trading partner. The US exported $427.7 billion to Canada and imported $481.2 billion. This resulted in a trade deficit of $53.5 billion. However, looking at direct investments, the US invested $438.8 billion in Canada, while Canada invested $589.3 billion in the US. Most US investments in Canada were in manufacturing, while Canadian investments in the US were mainly in finance, led by TD and BMO. Including these investments shows that the US benefits more overall.
The $53 billion trade deficit mainly comes from the U.S. importing a lot of oil from Canada. Although the U.S. could produce more oil, it continues to depend on this imported heavy oil for products like asphalt. Without Canadian heavy oil, the U.S. would have to purchase it from other countries like Venezuela, Iraq, Indonesia, China, Saudi Arabia, Qatar, Mexico, or Kazakhstan. Canada is the best choice because of its good human rights record, environmental standards, and stability.
Alberta exports 4.3 million barrels of oil and gas to the U.S. daily. Many American jobs and businesses depend on affordable resources from Canada, including oil, gas, grain, livestock, and timber, which are then processed and sold globally, including back to Canada. The U.S. relies on Canadian crude oil, while Canada depends on the demand from U.S. refineries, which process 97% of Canada’s oil exports.
The U.S. and Canada have a very strong trading relationship, with about $2.7 billion in goods and services exchanged daily in 2023. The U.S. is Canada's top investor, while Canada was the biggest source of foreign investment in the U.S. at the end of 2022. Both countries clearly benefit when working together. If we just found a way to keep politicians away from key economic issues.
*All dollar figures in this post are in US dollars.
