aside Politifact: The Truth About US Trade Surpluses And Deficits With Canada

The republican President Donald Trump along with his cabinet including his Commerce Secretary Wilbur Ross and the Director of Trade and Industrial Policy, Peter Navarro are just plain wrong with their plans to impose tariffs on our neighbors like Canada and Mexico and our allies like the (EU) European Union countries and the UK.

We’ve tried implementing tariffs in the past with dire results. The worst experience was with the 1930 Smoot-Hawley Tariff act which was enacted by the US Congress. At the time over 1000 economists signed a letter addressed to their US lawmakers begging them not to pass the tariffs because of the foreseeable negative consequences. But the law makers believed that they knew better. It did not take long for the US economy to tank by 26% to where it took years for the US economy to recover.

The president has not been presenting to the American public the big picture about our trade situation with most countries. There are legitimate trade problems with China but that is not the case with our neighbors and allies. Ordering tariffs on US neighbors and allies on the basis of  US national security interests is not the way to iron out any perceived areas of unfairness.

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Here is the rest of the story…

On March 15, 2018, Louis Jacobson of Politifact penned the following report, “Here’s what’s wrong about Donald Trump’s attack on Canada trade deficit”

Excerpts:

We do have a Trade Deficit with Canada, as we do with almost all countries (some of them massive). P.M. Justin Trudeau of Canada, a very good guy, doesn’t like saying that Canada has a Surplus vs. the U.S.(negotiating), but they do…they almost all do…and that’s how I know!”

Donald J. Trump

@realDonaldTrump

We do have a Trade Deficit with Canada, as we do with almost all countries (some of them massive). P.M. Justin Trudeau of Canada, a very good guy, doesn’t like saying that Canada has a Surplus vs. the U.S.(negotiating), but they do…they almost all do…and that’s how I know!

We wondered: Does the United States have a trade deficit with Canada? And does the United States have a trade deficit with “almost all countries”? We found that Trump’s statement was somewhere between incomplete and misleading.

.”Does the United States have a trade deficit with Canada?”

“Trump seems to be referring to a deficit in goods, which tells only part of the picture. (The White House did not respond to an inquiry.)”

“In 2017, the United States had a $23.2 billion deficit with Canada in goods. In other words, the United States in 2017 bought more goods from the Canada than Canada bought from the United States.”

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“However, the United States had a $25.9 billion surplus with Canada in services — and that was enough to overcome that deficit and turn the overall balance of trade into a $2.8 billion surplus for the United States in 2017. The same pattern occurred in 2016.”

“Those unhappy with current trends in trade, such as Trump, tend to highlight the balance of trade in goods, since that subset of trade is the one that shows just how much manufacturing activity the United States has lost to foreign countries in recent years. By contrast, the United States has fared much better in services, which includes finance, insurance, legal services, business consulting and entertainment.”

“Over the past 30 years, we have lost jobs in manufacturing, which produces goods, but gained a large number of very good jobs in service sectors and intellectual property,” Matt Gold, an adjunct law professor at Fordham University, told PolitiFact in February. In services, by contrast, “the U.S. dominates the world,” Gold said.”

“There’s a political connection here. Trump garnered significant support in the Rust Belt, which has been hit hard by trade deficits in goods, and he fared poorly in coastal and metropolitan areas that have benefited from the surge in services.”

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“It’s worth adding that a significant historical driver of the U.S. trade deficit in goods with Canada has been crude oil — a commodity that the United States has usually preferred to buy from Canada when possible, rather than from overseas suppliers that might be subject to greater political instability. It’s also a product for which the United States is increasingly less reliant on foreign sources overall.”

“After you take out oil products from Canada’s exports to the U.S., the U.S. runs a massive trade surplus plus against Canada,” to the tune of $49 billion in 2016, Daniel Trefler, a professor of economic analysis and policy at the University of Toronto’s Rotman School of Management, told PolitiFact in February. “If we are talking about manufacturing jobs, the U.S. is a huge winner.”

“Does the United States have a trade deficit with “almost all countries”?”

“By our calculations, this is incorrect.”

Image result for cartoons trump tariffs canada

We looked at the full list of countries and country equivalents that are tracked by the United States on trade balances to see whether the United States had a surplus or a deficit with them.

We found 129 countries or country equivalents with whom the United States had a surplus in 2017, out of 234 entities listed overall. This means that the United States had a surplus in 55 percent of those countries, or a majority.

Notably, this data refers to goods only; if we had the data for both goods and services, the percentage might go even higher, given the United States’ general advantage in services.

Image result for cartoons trump tariffs canada

We did find at least six major trading partners with whom the United States had a surplus in 2017 in goods and services: Brazil, Canada, Hong Kong, Saudi Arabia, Singapore and the United Kingdom. The United States also had a sizable surplus with the entire region of South and Central America.

That said, it’s reasonable to point out that for the United States, the biggest trade deficits are larger than the biggest trade surpluses.

.Here’s a rundown of the top 15 surpluses by country for 2017. (Data is for goods only.)

Rank Country Surplus in billions of dollars (goods only)
1 Hong Kong 32.5
2 Netherlands 24.5
3 United Arab Emirates 15.7
4 Belgium 14.8
5 Australia 14.6
6 Singapore 10.4
7 Brazil 7.6
8 Panama 6.0
9 Argentina 4.7
10 United Kingdom 3.3
11 Chile 3.1
12 Dominican Republic 3.0
13 Guatemala 3.0
14 Paraguay 2.6
15 Bahamas 2.5

And here’s a rundown of the top 15 deficits by country for 2017.

Rank Country Deficit in billions of dollars (goods only)
1 China 375.2
2 Mexico 71.1
3 Japan 68.8
4 Germany 64.3
5 Vietnam 38.3
6 Ireland 38.1
7 Italy 31.6
8 Malaysia 24.6
9 India 22.9
10 South Korea 22.9
11 Thailand 20.4
12 Canada 17.6
13 Taiwan 16.7
14 France 15.3
15 Switzerland 14.3

“The 15 countries for whom the U.S. has the largest deficits combine to a cumulative $842.1 billion, which is more than five times larger than the combination of the 15 largest surpluses, at $148.3 billion.”

“So among the United States’ largest trading partners, the biggest deficits are larger than the biggest surpluses. But that’s not what Trump said.”

“A final note: Experts who support free trade say that arguing over deficits and surpluses misses the point.”

“We should be running deficits with some countries and surpluses with others, since comparative advantage will vary, country by country,” said I.M. (Mac) Destler, who teaches at the University of Maryland School of Public Policy.

Image result for cartoons trump tariffs canada

Our ruling

“Trump tweeted, “We do have a Trade Deficit with Canada, as we do with almost all countries (some of them massive).”

“On Canada, Trump’s statement is at best telling only part of the story. The United States currently has a trade deficit in goods with Canada, but the United States’ edge in services turns the overall balance of trade into a surplus for the United States.”

“As for the world at large, Trump is wrong — the United States actually has a surplus with a majority of countries tracked in the official data. However, it’s reasonable to point out that among the biggest trading partners, trade deficits outpace trade surpluses in size.”

We rate the statement Mostly False.

.  Jun 12

Today’s CPI report confirmed the upward trend in prices. . . and a real wipeout in wage growth

5 comments

  1. Gronda, well done. Tariffs are rarely a good idea, but the data reveals why they are worthy of at least consideration on China. They make little sense anywhere else. With that said, bullying, lying to and lying about allies is much worse than the tariffs. As Senator John McCain said we are not valuing over 70 years of relationships with our allies. We are the pariah. We are untrustworthy.

    This issue more than any other frustrates me that Congress had failed to act or criticize the President. They know this is a horrible idea, yet they are being silent. Not letting the Corker Tariff bill not get voted on is shameful and McConnell and crowd need hear about.

    Keith

  2. Hi Gronda, et al.
    I just thought I would bring up a littled-voiced fact about trade practices. Both the US and Canada have moved a lot of their manufacturing assets off-shore. Industrialists of all shape and size ignored the need for jobs in North America in favour of wage-slave salaries in poorer, not-so-well-industrialized nations. For the most part those industrialists avoid the costs of worker benefits, workers’ compensation, ecological studies, pollution protection costs, and so much more. The profit increase for going off-shore is just incredible. (I will always remember the Michael Moore expose of Nike. Moore got Knight to agree that if Moore could find an American population centre that would provide Knight with all the workers it needed, then he would re-open a Nike manufacturing plant in the US. Moore, of course, had no trouble finding such a willing population area. Knight in turn had no trouble laughing in Moore’s face. No way would he ever return to the USA because he was able to sell his runners for prices over the $100 price bench, while his costs were about 25 cents a pair.) For Nike, he was pulling in profits in the range of 400% to 2000%. I doubt this was an anomaly regarding other off-shore industries.
    But one thing I do not know, are off-shore industries owned by American or Canadian financiers counted in those trade numbers bandied about by Dancing Donnie? Personally, I doubt it. And if I am correct, the “goods deficit” was brought on by the greed of the industries and manufacturers themselves, and has little to do with actual deficits.
    Plus, Trump and his Trump-pets have to realize, the number of consumers in the US is 10 times the number of consumers in Canada. And, not to appear biased, but our manufacturing quality laws, and even our food quality laws, are of a higher standard than those in many US states. Some consumers actually demand quality as opposed to price.
    All in all, i’m just hoping to demonstrate that numbers alone never tell the whole story.
    But I know, Trump, his psychophants, and his Trump-pets don’t give a crap about truth, but they sure love Trump’s sob stories

    • Dear Rawgod,

      What you are saying is right on. Trade has hurt a lot of manufacturing jobs in the US. When I was criticizing TPP, it was because it didn’t effectively address those earning less than $80,000 USD per year, which is frankly most Americans. But if those negotiating this deal could have effectively addressed this issue, I would have been for it.

      I also feel that if Americans use overseas manufacturing companies, they should be obligated to make sure that the personnel are treated with decency, with pay better than the competition, no children involved, limited hours, good safety record etc.

      It is an axiom for the USA that when the economy is doing well, the deficit is greater because so much of our goods are made overseas. So, you make a good point.

      Hugs, Gronda

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