Trump keeps making a wildly misleading claim about trade between the US and Canada

pulse

March 6, 2018 7:26 PM

President Donald Trump argues his new tariffs are needed in part to stem the trade deficit with Canada. But the US does not have a trade deficit with Canada.

President Donald Trump says new tariffs on steel and aluminum are needed because of "large trade deficits with Mexico and Canada."
The US does not have a trade deficit with Canada.
The US does have a trade deficit in goods, but it makes up for that deficit with a surplus in services.

In an early-morning tweetstorm Monday, President Donald Trump defended his decision to impose new tariffs on steel and aluminum by pointing to trade problems involving two of the US's closest allies.

"We have large trade deficits with Mexico and Canada," Trump said. "NAFTA, which is under renegotiation right now, has been a bad deal for U.S.A. Massive relocation of companies & jobs. Tariffs on Steel and Aluminum will only come off if new & fair NAFTA agreement is signed."

And according to an official White House readout of Trump's call with Canadian Prime Minister Justin Trudeau on Monday, Trump told his Canadian counterpart that the North American Free Trade Agreement "leaves the United States with a trade deficit."

But the US does not have a trade deficit with Canada.

According to the US Trade Representative, the US actually maintained a $12.5 billion trade surplus with Canada in 2016, the most recent data available.

The US did run a goods deficit of $12.1 billion, but it made up for it with a $24.6 billion surplus in services trade, such as intellectual property and travel.

Even looking strictly at goods, the deficit is not large compared with years past. Commerce Department data shows that the 2016 deficit was the smallest since 1993 and well down from a peak of $78.5 billion in 2005.

But the goods deficits are more than made up by the service surplus. In fact, Canada's ambassador to the US even corrected Trump when the president made the same claim in December — citing US data.

"To all our American friends: 'U.S. goods and services trade surplus with Canada was $12.5 billion in 2016.' Source: Office of the United States Trade Representative," Ambassador David MacNaughton tweeted.

pulse