The man gets more farcical every day. In advance of his meeting with Canada’s newly reelected prime minster, the Donald literally jumped the shark, letting loose a fusillade of outright lunacy that would ordinarily raise questions about his compos mentis. But blithering idiocy like the following has become so commonplace from Trump that it’s apparently being taken for granted.
I look forward to meeting the new Prime Minister of Canada, Mark Carney. I very much want to work with him, but cannot understand one simple TRUTH – Why ismAmerica subsidizing Canada by $200 Billion Dollars a year, in addition to giving them FREE Military Protection, and many other things?”
“We don’t need their Cars, we don’t need their Energy, we don’t need their Lumber, we don’t need ANYTHING they have, other than their friendship, which hopefully we will always maintain.
They, on the other hand, need EVERYTHING from us!
While this is obviously pure gibberish in its own right, we can’t even say that it was deliberate over-the-top bombast designed to warm-up his guest for a “full and frank exchange” in the Oval Office Tuesday afternoon. The chances are, in fact, that the Donald actually believes this stuff because his economic framework is an utterly primitive zero-sum construct in which all exchanges produce a “winner” and a “loser” and, furthermore, if his side is losing it’s because the other side is comprised of nefarious cheaters and thieves.
Then again, in the case of Canada even the gross trade numbers do not bear him out— since the $200 billion subsidy number is purely from Mars. The actual US trade deficit with
Canada in 2024 was just $63.3 billion, if that’s what he is referring to as the “subsidy”, but even that doesn’t mean all that much.
As it happened, two-way goods trade between our highly integrated economies was $762 billion ($412 billion of US imports and $350 billion of US exports), meaning that the residual balance in Canada’s favor was a modest 8.3% of total turnover. Even then, two-way services trade between the two countries totaled $150 billion, wherein the $30 billion surplus in the US favor amounted to 20% of total turnover.
So when it comes to exchange of goods and services across the 5,500 mile US/Canadian border total trade amounted to a hefty $911 billion or more than 3% of the combined GDP of the two countries. Yet the net balance was just $33 billion in favor of Canada or a mere 3.6% of total commerce.
Needless to say, that marginal imbalance had nothing to do with cheating by Canada. After all, owing to the Donald’s own pride and joy—the NAFTA redo he christened as the USMCA—there were zero tariffs on all of the $911 billion of two-way trade. And even Canada’s notorious dairy tariffs were subject to a Trump Administration inspired workaround that keeps Canada’s 150% tariffs on butter, cheese and milk at zero in US/Canada trade, as long as imports from the US are below some very high volume thresholds, which US dairy exporters have never reached.
Yes, Canada may be a tad more “socialist” than the US but its trade balances with the rest of the world shows clear as day that it provides no advantage on the bottom line. To wit, in 2024 Canadian exports to the rest of the world were $144 billion, while its imports were $212 billion. So it had a $69 billion trade deficit with the rest of the world, amounting to 19% of its two-way trade.
Now, if the Canadian economy is rigged in some mysterious way so as to cheat in its trade practices, it becomes a bit hard to explain how this purported rigged system results in an 8.3% surplus with the US, but simultaneously a 19% deficit with the rest of the world.
Further compounding the issue is the fact that on services trade, Canada had a $26 billion surplus with the balance of the world, representing a robust 17% of two-way services trade. Thus, on the overall goods and services balance with the rest of the world, Canada posted $232 billion of exports and $275 billion of imports for a negative balance of $43 billion.
Perhaps a pattern is already evident here. On total goods and services in 2024, Canada had a $33 billion surplus with the US and a $43 billion deficit with the rest of the world. Overall, therefore Canada did $1.42 trillion of two-way business with the world and ended up with a de minimis $10 billion deficit. That is to say, if the Canadians are actually systemic and notorious cheaters, a 0.7% deficit with the world isn’t much to write home about.
In short, what in the hell is the Donald talking about? Plain and simple, there is not an iota of evidence that Canada is an unfair trader—to say nothing of the preposterous charge that we subsidize our neighbor to the north by $200 billion per year.
Actually, what is likely going on with Trump’s utterly pointless campaign against Canada on trade is that he was given some “gotcha” numbers and ran with them without any knowledge or comprehension of their context and causes.
Thus, in the quote above he singled out energy, autos and lumber as stuff we get from Canada that in his judgement we don’t need, which is to say we could likely make in the US at a higher cost. Of course, opting for higher cost made in the USA supplies of these products would likely reduce US GDP, not enhance it, but then the essential genius of comparative advantage the Donald stubbornly refuses to understand.
However, when you look at the actual data for the commodities that seem to have put a bee in the Donald’s bonnet the silliness of his trade notions become all the more apparent. As it happens, in fact, the US buys $150 billion of energy (petroleum, natural gas and coal) from Canada every year, but exports only $23 billion back. So the energy trade deficit alone is a whopping $127 billion or more than twice the overall US goods deficit with Canada of $63 billion.
But one look at the US data tells you that the Canadian energy export surplus to the US signifies a globally operative win/win for both countries. That’s because in a figurative but partially literal sense, energy flows south on the North American continent. Canada’s heavy crude is exported to the upper Midwest tier of refineries and industrial users, along with substantial pipelines deliveries of natural gas and liquids to these same areas.
At the same time, the massive US production of shale-based crude oil, natural gas and liquids is concentrated in Texas, Oklahoma, Louisiana and the Gulf, where it is refined and partially shipped into the export trade to the rest of the world. Thus, in 2024, the US exported $212 billion of energy products to the rest of the world (excluding Canada) but imported only $43 billion from world suppliers outside of Canada.
In short, the US had a $169 billion energy surplus with the rest of the world, which more than off-set the $127 billion energy deficit with Canada. What this means, of course, is that the US had an overall $42 billion energy trade surplus with the entire world— notwithstanding the Donald misbegotten ragging about energy imports from Canada. The fact is, economic efficiency is being served all around as available supplies are matched up with end-demand on a least-cost of delivery basis across the North American continent and beyond. That’s free markets 101.
Likewise, the Donald has undoubtedly heard that the US has a small auto trade deficit of $15 billion in parts and $11 billion in finished vehicles. Yet that’s not a nefarious unfair trade doing, either. To the contrary, it’s purely a product of the historical evolution of the industry from Detroit eastward into Ontario and outward into Michigan, Ohio, Indiana and beyond.
The resulting happenstance of plant locations on either side of the border and the labyrinthine flow of materials, parts and sub-assemblies back and forth is just Mr. Market at work. As it happens, labor costs and other other production expenses are virtually the same on both sides of an integrated auto production ecosystem where the national border is essentially invisible.
Likewise, the US imports $36 billion of lumber from Canada versus exports of only $18 billion, but that’s pretty explainable, too. The Canadian northwest produces 2.4X more forestry products and lumber than the US northwest, while the US market for these products is far bigger.
More importantly, when you set aside the Donald’s three hobby horses with respect to the bilateral trade with Canada—energy, autos and lumber—-you find that the rest of the trade accounts stack up massively in favor of US exporters. That is, when it comes to machinery, computers, electronics, pumps, valves, trucks, locomotives and many other industrial product lines, the US exported $247 billion of stuff to Canada in 2024 while importing only $140 billion of the same products from Canadian suppliers.
That is to say, there was a $107 billion US surplus with Canada on some of these less visible products, which amounted to 28% of two-way trade in these items. These were “wins”, of course, in the Donald’s formulation of the trade game, but, obviously, the Donald is looking for “losses” and therefore purported reasons to “tariff”.
At the end of the day, the US/Canada trade in goods and services represents a free trade environment functioning at an extremely high level of efficiency on nearly $1 trillion of two-way commerce. That fact that Trump can’t resist tilting at windmills vis a vis Canada tells you all you need to know: When it comes to the vast, intricate facts and economics of global trade, the Donald is a complete ignoramus and bull-in-a-china-shop who has not yet begun to fully execute the sheer Demolition Derby that his crackpot theories and factoids constantly churn out.
If there was ever any doubt, Trump’s latest threat to tariff the intangible product called foreign-made movies surely resolves it. Then again, as far as the Donald is concerned MAMGA (Making American Movies Great Again) is all part of his Oval Office gig.
The Movie Industry in America is DYING a very fast death. Other Countries are offering all sorts of incentives to draw our filmmakers and studios away from the United States. Hollywood, and many other areas within the U.S.A., are being devastated. This is a concerted effort by other Nations and, therefore, a National Security threat. It is, in addition to everything else, messaging and propaganda! Therefore, I am authorizing the Department of Commerce, and the United States Trade Representative, to immediately begin the process of instituting a 100% Tariff on any and all Movies coming into our Country that are produced in Foreign Lands. WE WANT MOVIES MADE IN AMERICA, AGAIN!
Now how in the hell could you collect a 100% tariff on a movie shot on location in the Australian outback, but put through post-production in Hollywood: That is, picture editing, sound editing, Foley editing, sound mixing, visual effects, color correction, titles, credits and graphics etc. And, for crying out loud, how would you determine the customs value for a digitized mass of raw film not yet put through post-production?
The point is, the whole idea is from wack-a-do land and it surely was not even vetted by the crackpot protectionists who surround the Donald in the White House. So whether MAGA fanboys want to admit it or not, we are further off the beaten path of rational economic policy than Richard Nixon was at Camp David when he shit-canned the gold-anchored dollar and imposed a jerry-built disaster of wage, price, profit, rent and interest controls on the entire US economy in August 1971.
Needless to say, if the POTUS plans to wield the blunderbuss tool of huge tariffs to counteract every stupid move of governments around the world to subsidize or advantage domestic economic activity, such as tax credits for movie production, there is no end to the insanity that is yet in store. And if foreign production of movies is a threat to National Security per the POTUS quote above, then surely every jot and tittle of the $29 trillion US economy is fair game for presidential meddling, as well.
As one wag noted this AM, Trump is essentially placing tariffs on the idea of filming on location — and, in so doing, telling Hollywood what kinds of stories it is now allowed to tell. Well, unless it wants to start paying impossible amounts for the privilege of doing otherwise:
Did you like Raiders of the Lost Ark? Steven Spielberg had to film the desert sequences of that film in Tunisia, because no place in America looked remotely plausible as a stand-in for Egypt”.
In short, the Donald is heading so deep into a rabbit hole of trade policy madness that there is no telling where we will come out. But it will surely not be a golden age of prosperity.
Indeed, just a few more weeks of this nonsense and both main street and Wall Street will begin to buckle under the sheer uncertainty and madness the Donald is unleashing. Butnthat will bring about its own cure—an economic crisis, a mid-term GOP wipe-out in 2026 and a Trump presidency that might not make the full eight years.
Reprinted with permission from David Stockton’s Contra Corner.
