Does the U.S. have a trade deficit with Canada?
President Donald Trump insists that the U.S. has a trade deficit with Canada, but data from the Commerce Department doesn't back him up.
Mr. Trump recently asserted to Canadian Prime Minister Justin Trudeau that the U.S. suffers a trade deficit with Canada, according to the Washington Post, although the president reportedly said in a fundraising speech on Wednesday that he "didn't even know" when he made the statement. He added, "I had no idea."
The president doubled down on Thursday morning, tweeting that "we do have a Trade Deficit with Canada, as we do with almost all countries (some of them massive)."
So what are the facts? Figures from the U.S. Department of Commerce showed a trade surplus with Canada of $2.7 billion last year.
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) March 15, 2018
The issue isn't merely academic, given that the Trump administration is currently renegotiating the North American Free Trade Agreement (NAFTA) with the goal of wringing better trade terms from Canada and Mexico.
A trade deficit indicates consumers and businesses in the U.S. bought more from Canada than the other way around.
In Mr. Trump's view, deficits reflect a weakness in America's trade policies. He has asserted that NAFTA is "the worst trade deal ever made." Still, economists don't necessarily view trade imbalances as inherently negative, because they can reflect a number of factors besides trade policies, such as currency valuations and the health of each economy.
Trade in goods
On Thursday afternoon, White House press secretary Sarah Sanders said on Twitter that Mr. Trump was referring to trade in "goods."
In the briefing I said I would provide the trade deficit number we have with Canada. In 2017 we had a $17.58 B trade deficit. In January 2018 we had a$3.63 B trade deficit. Both reflect trade in goods. Which is exactly what @POTUS referenced. https://t.co/PHm7hXdszD
— Sarah Sanders (@PressSec) March 15, 2018
That would include cars, appliances, food and clothing. And, in fact, the U.S. does import more goods from Canada than it exports: The deficit in goods was $23.2 billion in 2017.
Trade in services
However, there's another side to trade: services. That includes everything from legal services to tourism. When that's included, the trade imbalance flips to a surplus.
The U.S. had a $25.9 billion surplus in services with Canada, according to Commerce Department data.
Combine both goods and services and the U.S. had a trade surplus with Canada of $2.7 billion last year.