I think both sides need to take a deep breath on the Canada-US trade “war”.
Using general and rounded numbers, the US exports about $425B to Canada annually (2025). In return, Canada exports $450B to the US. So Trump is right. A trade imbalance.
And another thing Trump is right about - exports are far more important to Canada than they are to the US.
So what does that mean?
Well, you could say that it looks like Canada is exporting more than it imports and the trade deficit is bad, and needs to be corrected, and that tariffs will hurt Canada a lot more than the US because imports and exports are far more important to Canada than they are to the US.
Or, you could dig down a bit. If you did that, you’d see that at least one-third of Canadian exports to the US are energy (about $160B). While Canada likes exporting energy, I’d suggest the US needs to import it more than Canada needs to export it, so here, Canada is providing something the US needs. Yes, eventually, US refiners would change supply lines to source heavier grades of crude from elsewhere, but likely at a higher cost. And then, of course, there’s natural gas, which is exported to the US from Canada at a low price and then re-sold by the US as LNG at a much higher price, making more money for Americans (check out the US domestic volumes of natural gas consumed plus exported volumes, and compare that number to US domestic production). There’s a reason Trump hasn’t put tariffs on imports of energy.
And then we come to other raw materials like potash, rare earths, raw minerals, gold and others which are mined in Canada and effectively processed in the US. These exports add many more billions to Canadian exports to the US. And no tariffs on this either.
The bottom line (finally!) is that yes, there is a trade deficit between Canada and the US in Canada’s favour, but if you look at merchandise or manufacturing and services, the US has a huge surplus in trade with Canada.
There is a lot of hot air being blown on both sides of the border. Certainly, this trade war will hurt some pockets in both Canada and the US, but both Canadians and Americans need to realize that this is not an existential issue for Canada, contrary to what some US (and Canadian!) officials have stated. More than half of the trade between Canada and the US is vital to the US’s interests, including national security, and it won’t be going anywhere any time soon.
What will happen as Canada diversifies its markets for those materials which the US wants or needs is that the US will ultimately end up paying a higher price for those commodities. Note that the average differential between Canadian crude prices and WTI has narrowed by over 30% since the expansion of the TransMountian pipeline came into service last year. This is more money in Canada’s pockets, and less in those of the buyers of its energy. And current US policies are making Canada do what it should have been doing all along, which is diversifying the markets for its products, rather than just relying on what’s easiest.
It’s hard not to be grateful to those who provided the much-needed impetus for recent changes in Canada’s industry and trade policies. But if I were an American, and if I were taking the long view, I’m not sure I would see what’s going on as good news.
