Elbows up

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MAGA supporter message on Truth Social. However White House assertions about Canada are patently false, says Ryan Lewenza. Just look at the facts.

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   By Guest Blogger Ryan Lewenza

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President Trump has claimed Canada has been “ripping off the U.S.A. for decades.” He has also suggested Canada should “fall in line” or face serious consequences. He has even referred to Prime Minister Mark Carney as “Governor Mark Carney.”

The rhetoric has not been limited to the President. U.S. Commerce Secretary Howard Lutnick has said that “Canada is not open to” American business and bluntly added, “They suck.”

Treasury Secretary Scott Bessent mocked Canada’s military capabilities, asking, “How are we going to be at war with Canada? They’re going to take their two submarines from the Edmonton Mall and sic them on us?”

How did we get here?

It is important to recognize that this hostility is not grounded in a detailed policy framework of the U.S. government, nor does it reflect the views of most Americans. Rather, it stems from the long-held beliefs of one man: Donald J. Trump.

For decades, Trump has viewed international trade through a zero-sum lens, convinced that America’s trading partners are benefiting at its expense. In his view, if another country gains from trade, the United States must somehow be losing.

To be fair, some countries have engaged in unfair trade practices with the United States. Canada, however, is not one of them.

Let’s review some of these statements and demonstrate how the facts simply do not support the narrative being promoted by the president and his administration.

First, U.S. officials argue Canada has been taking advantage of America through “unfair trade practices” and excessive tariffs. However, the facts tell a different story. Canada, the United States, and Mexico have operated under a free trade agreement for decades, most recently through the USMCA, which was renegotiated during President Trump’s first term.

In fact, President Trump himself repeatedly praised the agreement as the “best trade deal ever.” As a result, most goods and services traded between Canada and the United States move across the border tariff-free. Put simply, Canada does not impose broad tariffs on U.S. imports under the terms of our free trade agreement. Full stop.

The one notable exception is dairy, where Canada maintains tariff-rate quotas under its supply management system. It is important to note that these tariffs only apply once imports exceed a specified quota threshold. While tariff rates above those limits can be significant, dairy is a unique case and one of the few sectors where such protections exist.

The rationale for supply management and the tariffs is straightforward: Canada views a stable and reliable domestic dairy industry as strategically important and a national security issue. Supply management helps provide that stability by supporting Canadian farmers and ensuring a consistent domestic food supply. There is also concern that, without these protections, large U.S. dairy producers could flood the Canadian market potentially undermining the long-term viability of the industry.

So, claims by President Trump and U.S. officials that we charge high tariffs on U.S. products and therefore have been ripping off the U.S. are patently false.

Second, President Trump frequently points to the large U.S. trade deficit with Canada as evidence of an unfair trading relationship. However, there are several important considerations that are often overlooked. As shown below, the U.S. goods trade deficit with Canada was approximately $45 billion last year. While this is the figure that draws President Trump’s attention, it does not tell the full story.

The U.S. runs much larger goods trade deficits with several other countries, including r$200 billion with China, $196 billion with Mexico, and $178 billion with Vietnam. Canada’s $45 billion deficit ranks only 11th among U.S. trading partners. Despite this, Canada is often portrayed as one of the most problematic trade relationships.

The primary reason the U.S. records a goods trade deficit with Canada is its imports of Canadian energy. The U.S. purchases nearly four  million barrels of Canadian oil per day because domestic production alone cannot meet their oil needs. Canadian oil is reliable, competitively priced, and many U.S. refineries are specifically designed to process it. Excluding energy imports, the U.S. would actually run a goods trade surplus with Canada.

Finally, the goods trade deficit does not capture the full economic relationship because it excludes services trade. Last year, the U.S. recorded a services trade surplus with Canada of approximately $28 billion. When goods and services trade are combined, the overall trade relationship is much closer to balanced than the headline goods deficit suggests.

U.S. goods deficit with Canada last year was $48 billion

Source: U.S. Census

Finally, I believe President Trump overlooks an important factor: the vast difference in size between the Canadian and U.S. economies. The U.S. economy is roughly 13 times larger than Canada’s, and its population is nearly nine times greater. Given this significant disparity, it is mathematically difficult to envision a scenario in which trade between the two countries is perfectly balanced.

Consider the numbers. Last year, the United States exported approximately $333 billion in goods to Canada. Dividing that figure by Canada’s population of roughly 40 million people means Canadians purchased about $8,325 worth of U.S. goods per person.

By comparison, Canada exported approximately $381 billion in goods to the United States. Spread across the U.S. population of roughly 350 million people, that works out to only about $1,088 of Canadian goods purchased per American.

In other words, on a per capita basis, Canadians purchase more than seven times as much from the United States as Americans purchase from Canada. This highlights the challenge of expecting perfectly balanced trade between two countries of such different sizes. Given Canada’s much smaller population and economy, there are natural limits to how much more American goods Canadians can absorb. Viewed through this lens, the existence of a modest U.S. trade deficit with Canada is far less surprising and arguably reflects basic economic arithmetic rather than an unfair trading relationship.

President Trump is notorious for playing fast and loose with the truth. In my view, he’s completely misrepresented the trade relationship between our two nations, and his treatment of once a close ally has been reprehensible. I fully support Carney’s decision to walk away from the trade deal as that was more of a shakedown than good-faith negotiations. Time will tell whether this was the right decision for Canada and our economy.

Ryan Lewenza, CFA, CMT is a Partner and Portfolio Manager with Turner Investments, and a Senior Investment Advisor, Private Client Group, of Raymond James Ltd.

Source: https://www.greaterfool.ca/2026/09/05/elbows-up/