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                   New Directions in Canada-U.S. Trade Under Donald Trump? 

 

By Randall White

According to one recent Ontario press report, anger over trade deals across America’s Rust Belt made Donald Trump the next president of the United States. 

In another account, the latest instalment of longstanding Canada-U.S. conflict over softwood lumber could be the opening shot in a harsh trade war, pitting the United States against Canada, Mexico, and China.

As the President-elect has noted in the past, Canada, Mexico, and China are currently the three largest U.S. trading partners. And each partner sells more to America than it buys from the USA that he says will soon be made great again. 

Yet Canada’s trade relationship with the United States is somewhat exceptional.

The argument here was summarized this past spring by the U.S. geopolitics consultant George Friedman. It is true that “If we drill into the trade numbers, we see that Canada is a leading importer for many American states.”

At the same time, most of the U.S. also “relies on Canada as its main export market. The only region outside the Canadian orbit is the Southwest, where the primary export destination is Mexico. In other words, although the balance of trade is slightly in Canada’s favor (sic), many individual U.S. states depend heavily on Canada to buy their exports.”

These and other trade statistics have been tidily gathered on the website of the Embassy of Canada in Washington — under the heading “State Trade Fact Sheets” (generally “based on 2015 data in U.S. dollars”).  

In the spirit of George Friedman, Canada is the largest “export trading partner” — or just export market — for 35 of the 50 states of the union.    

And all told, 23 of these 35 Canadian-market-dependent U.S. states (about 66%) voted for Donald Trump on November 8.  

Canada-US trade can also be a significant issue even in some American states outside what Friedman calls the Canadian orbit. 

Texas is part of his Southwest region, focused on the export market in Mexico. But close to half a million jobs in Texas still depend on what the State Trade Fact Sheets call Canada–U.S. trade and investment. And Texas has a very healthy positive trade balance or surplus with Canada ($25.4 billion in exports in 2015 versus only $15.9 billion in imports).

Texas was just one of 30 states of the union that voted for Mr. Trump on November 8. 

Among these “Trump states,” while 23 (or more than 75%) have Canada as biggest export trading partner, 22 Trump states (73%) actually have a positive trade balance or surplus with Canada. (They sell more to us than we sell to them.)

Taken all together, some 8.75 million jobs in the 30 states that Donald Trump won in the Electoral College depend on Canada–U.S. trade and investment.

As you ponder the state-level statistics on Canada-U.S. trade, it is easy to agree with Friedman’s conclusion this past spring that “from a strategic standpoint, Canada’s core interest in the US ... to maintain strong economic relations ... is not at risk because it is a shared interest rooted at the all-important local level.”   

Kevin O’Leary has nonetheless been warning that Canada is going to get “squashed” by the new administration in Washington.  

There are also arguably two other rising export trade markets in the USA today, outside the Canadian orbit. Mexico is the biggest market for the four states along the southern border — Texas, New Mexico, Arizona, and California.  And China is the biggest market for the Pacific states of Alaska, Washington, and Oregon, as well as Louisiana and South Carolina further east. 

Some have suggested that the new U.S. administration has serious trade issues with its other two largest trading partners of China and Mexico, that it does not have with Canada. But Canada will still get caught in the crossfire of a looming harsh trade war.

It might help a little if the State Trade Fact Sheets buried on the website of the Embassy of Canada in Washington were more aggressively publicized in the USA, as part of a somewhat updated Canadian trade policy.  

They should be especially better known among the 23 states that voted for Mr. Trump and have Canada as biggest export market, for instance. Or the 22 Trump states that have a trade surplus with Canada. 

Returning to George Friedman’s words, “although the balance of trade is slightly in Canada’s favor (sic), many individual U.S. states depend heavily on Canada to buy their exports.” And in the early 21st century Canada could be holding a stronger hand in Canada-US trade negotiations than some Canadians (and Americans) think. 

 

 

 

 

 

About Randall White

Randall White is a former senior policy advisor with the Ontario Ministry of Finance, and a former economist with the Ontario Ministry of Municipal Affairs and Housing. He is the author of Ontario 1610-1985: A Political and Economic History and Ontario Since 1985. He writes frequently about Ontario politics.
Posted date : December 05, 2016

View all of Randall White's columns
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