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Frank Bernheisel: The View From Here
Frank Bernheisel
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Frank Bernheisel
Posted 6.15.18
Just Outside Washington

FRANK BERNHEISEL

O Canada, O Deficit

Sunday is a special for the TV talk shows, and it was extra special as President Trump winged it to Singapore from the G-7 summit. On the talk shows, OUTRAGE.

White House economic adviser Larry Kudlow tore into Canadian Prime Minister Justin Trudeau for "double crossing" President Trump with critical comments about U.S. trade policy. Peter Navarro, the White House National Trade Council director, said there is a "special place in hell" for any leader who engages in bad faith diplomacy with President Trump, referring to PM Trudeau. The reasons behind this "tough" talk are trade relations, surpluses and tariffs with Canada, so what is some of the history?

  • During his campaign in 2016, Donald Trump relentlessly criticized NAFTA as "the worst trade deal ever signed."

  • In February President Trump told state gover`nors: "We lose a lot with Canada. People don't know it. Canada is very smooth. They have you believe that it's wonderful. And it is. For them -- not wonderful for us ... so we have to start showing that we know what we're doing."

  • On March 5 he tweeted: "We have large trade deficits with Mexico and Canada. 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."

  • On May 31, President Trump announced the US would impose tariffs on imports of steel and aluminum from Canada and said that tariffs could be imposed on imported autos.

  • On June 7, PM Trudeau said: "Let me be clear: These tariffs are totally unacceptable."

  • Saturday, June 9 President Trump declared: "If they retaliate, they're making a mistake."

  • Then he tweeted: "Just left the @G7 Summit in beautiful Canada. Great meetings and relationships with the six Country Leaders especially since they know I cannot allow them to apply large Tariffs and strong barriers to U.S.A. trade."

  • PM Trudeau said at his news conference June 9 that Canada will "move forward with retaliatory measures" on July 1 in response to the U.S. tariffs on aluminum and steel.

  • PM Trudeau said that "he was happy to announce that we have released a joint communique by all seven countries," of the G-7, which said "We strive to reduce tariff barriers, non-tariff barriers and subsidies."

  • President Trump then tweeted: "Based on Justin's false statements at his news conference, and the fact that Canada is charging massive Tariffs to our U.S. farmers, workers and companies, I have instructed our U.S. Reps not to endorse the Communique as we look at Tariffs on automobiles flooding the U.S. Market!"
So all this noise deserves a quick look at some of the data. The office of the U.S. trade representative states that the American goods and services trade surplus with Canada was $12.5 billion in 2016 and a trade surplus with Canada of $8.4 billion in 2017.

According to Bank of America, the percentage of the total US trade deficit attributable to Canada and Mexico is under 10 percent.

Chart 1 shows their calculation of the trade deficit with the NAFTA partners and the total trade deficit.

chart

The U.S. trade representative is referring to Canada alone and the Bank of America chart shows Canada and Mexico combined. In trade and economic issues, there are always issues of what data is used. However, in this case, it is clear to me that while there are some trade issues with Canada, there is no or perhaps a very small trade deficit.

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