En route to Singapore to try to resolve long-standing foreign-policy tensions with the rogue state of North Korea, President Trump ramped up foreign-policy tensions with longtime ally Canada.
After leaving a meeting of some of the world’s wealthiest nations in Quebec, Trump lashed out at Canadian Prime Minister Justin Trudeau on Twitter following a news conference in which Trudeau said that he planned to respond in kind to new U.S. trade sanctions on his country.
Trudeau was “meek and mild” during the talks, Trump said, then turning “very dishonest and weak” after Trump left (early).
“Our tariffs are in response to his of 270% on dairy!” Trump wrote, part of “massive Tariffs to our U.S. farmers, workers and companies” imposed by Canada. “Fair Trade is now to be called Fool Trade if it is not Reciprocal,” he wrote in another tweet. Trump has regularly complained about the trade imbalance with Canada, equating the United States taking in more goods than it exports to a nation with our country somehow getting ripped off.
All of this, though, buries the real data on trade with Canada — and the likely reason Trump lashed out at Trudeau.
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.
Trump doesn’t seem to think that constitutes our ripping off Canada.
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’s argument, though, centers heavily on dairy trade, arguing against Canada’s tariffs on milk imports. Canada has a substantial net deficit on dairy trade, which is why it imposes tariffs.
But dairy makes up a tiny portion of trade between the United States and Canada. Dairy was about 0.2 percent of the total value of goods exported to Canada in 2017. The biggest category of goods exported was vehicles, followed by machinery, mineral fuels and plastics. Those are the products we mostly import from Canada, too, according to the U.S. Trade Representative. (The top five categories of products are listed.)
Notice, though, that we export more in agricultural products to Canada than we receive. What’s more, we export more than five times as much dairy as we import. Then, at the bottom of that chart, services. We export twice as much in services as we import. Ignore that, and suddenly you’ve got a trade deficit, and if your argument is that trade deficits are necessarily bad and signs of being taken advantage of, you’ve suddenly got a problem.
What drove Trump’s response to Trudeau, though, seems to have been something more abstract.
“POTUS is not going to let a Canadian prime minister push him around,” National Economic Council Director Larry Kudlow, said on CNN on Sunday. “He is not going to permit any show of weakness on the trip to negotiate with North Korea.”
Much of this, then, may not have been about trade. It may, instead, have been about projecting strength to Kim Jong Un — at the expense of Justin Trudeau.