The US has 340 million people. Canada has 40 million.
Trump claims that one of the two countries is being “ripped off” by a trade imbalance where Canada spends $200 billion less per year on American goods and services than we do on American products. Aside from the inaccuracy of the statement, he is absolutely right. There is a trade imbalance that is perceptibly one-sided.
First, America imports huge amounts of our heavy crude oil. Why? Because they chose to construct refineries that work much better with heavy crude than with the light crude that they extract from their shale oil fields. So that’s their choice.
Second, they import a lot of aluminum from us. Why? Because aluminum production requires huge amounts of electricity and the USA has very limited access to cheap hydro electricity, while Canada has huge capacity. So Americans buy from us because it is much more sensible and always will be cheaper.
43% of foreign investment in Canada’s businesses comes from the US. So many of the products we export actually are exported by American companies, making profits in Canada and sending that money back to the US. So by placing tariffs on those exports, Trump punishes his own investors, many of whom come from pension funds.
But that leaves this ill-defined “rip off,” and it still exists. How?
Since countries do not buy products as much as citizens by consumer goods and governments buy stuff to benefit the citizens, it is not the two countries that have an imbalance, but the people in those countries. What Trump means to say is that one country’s people should be buying a lot more of the other country’s products to be more fair. And the country that should be buying much more is not Canada. It is the United States of America.
If Canada buys $400 billion of goods and services from the US, and the US buys $600 billion from Canada, then each Canadian is buying $10,000 of products from America. Each American is buying a mere $1,764 from Canada. So there really is a trade imbalance, and it’s the USA that is ripping off Canada.
So, Trump, tell your people to stop stealing from us! Make America Buy Again. From Canada.