Canada is one of the countries robbing the U.S. piggy bank, according to President Donald Trump, with its 270 percent tariff on dairy and a significant U.S. deficit on traded goods.
But Trump is not telling the whole story of America’s trade relationship with Canada – or any trade partners, for that matter – when he fails to acknowledge services alongside material goods.
It’s true that in 2017 the United States imported more in goods from Canada than it exported. That was the case with each of the 15 countries with which the United States does the most trade. The arrows on the map below are scaled to the amount of the deficit with each country.
But that’s only goods, tangible products. The United States also exports a lot of services, a category which covers a broad range of things, like legal services or Internet hosting. Considering both goods and services, the United States ran a surplus with Canada in 2016. A small surplus, but a surplus.
On the point of dairy, which constitutes a mere 0.2 percent of American trade with Canada, the latter runs a substantial deficit – hence the tariffs.
For starters, that rate applies to dairy imports in excess of a specified quota. Second, that tariff doesn’t appear to have been much of an impediment to dairy importers as Canada has run a trade deficit in dairy products for the past decade, buying more than twice as much from abroad as it exports.
Still, Trump maintains that the U.S. is getting ripped off by its neighbors to the north.
And the president’s advisers aren’t keen on allowing services into the mix:
Trade adviser Peter Navarro seemingly rejected the idea that services should be considered in trade balances in conversation with Axios last week, saying, “We on Team Trump are astonished by the argument that America’s future is in the services sector, and Americans don’t want ‘dirty’ jobs in steel furnaces.” The government estimates, though, that more than three-quarters of U.S. gross domestic product is a function of the service sector already, as it has been for some time.
Trump is determined to continue promoting a carefully crafted narrative surrounding America’s trade with Canada that ignores key facts in favor of picking a fight with a trusted ally.
The only question is, why?