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Three reasons why trade tensions between Canada and the US should drop

by Investor News Today
March 30, 2025
in Investing
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Three reasons why trade tensions between Canada and the US should drop
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At this time may need been a turning level in Trump’s relationship with Canada although many would argue that it is now past restore. Yesterday Canadian Prime Minister Mark Carney mentioned:

“The outdated relationship we had with the US, primarily based on deepening
integration of our economies and tight safety and navy
cooperation, is over.”

At this time although, Trump took a distinct tone with Canada, dropping the 51st State speak and did not tackle the PM as ‘governor’ whereas saying that there can be a superb deal for the US and Canada.

I believe the connection has bottomed and that is a giant alternative in lots of trades. That mentioned, it is tough to have conviction in that decision given all of the unpredictability within the Trump 2.0 administration.

Folks outdoors of Canada do not perceive simply how wounded the nation feels however some knowledge this week highlighted it with ahead airline bookings to the US down 70% out to September. Folks additionally do not appear to know how phoney the speak of Canadian fentanyl and tariffs are.

Some information:

1) Canadian tariffs do not exist

The US-Canadian relationship is among the all-time nice really free commerce agreements. The common tariff price of US items going into Canada is 1.1%, per the WTO. So in the event that they US needs to really do reciprocal commerce, then that might be tremendous.

Now you see some silly charts floating across the web about dairy and cheese tariffs but it surely’s nonsense. For one, each nation protects and subsidizes their farmers (and maybe none greater than the USA). These are additionally very small elements of US-Canada commerce and had been negotiated in USMCA.

2) Canada does not have a manufactured items surplus with the US

Here is an ideal chart from TD that illustrates that mainly your complete commerce surplus that Canada at present has with the US is power — all within the type of highly-discounted oil and pure gasoline.

Ex-energy, the US has had a surplus with Canada for yearly this century.

If you wish to take a look at autos alone, the US at present enjoys a surplus in auto commerce with Canada. Notice that this chart additionally excludes providers exports, the place the US additionally enjoys a surplus of round $15 billion.

3) Based mostly on the scale of commerce, the US deficit is small

Utilizing US Census Bureau figures, the US whole commerce deficit with Canada of roughly US$45 billion in 2024, or a mere -0.2% of US GDP. It is 4% of the general US commerce deficit.

Regardless of all of this, you’ve gotten Trump repeatedly saying issues like “we’re subsidizing Canada by $200 billion a yr”. Neither he nor the White Home have ever indicated how this math makes any sense.

What is the technique right here?

It is exhausting to grasp any form of technique, except you consider within the 51st State line. Maybe that is an extremely-aggressive escalation in rhetoric and a few short-term tariffs in an effort to extract a barely higher commerce deal. That is my base case but it surely’s trying increasingly more like a silly technique that in the end advantages nobody.

I will be on BNNBloomberg on Monday morning speaking about a few of this. Tune in.



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