In recent debates surrounding the trade relations between the United States and Canada, several misconceptions have emerged, primarily stemming from comments made by former President Donald Trump. Among these are claims about tariffs, agricultural exports, and defense spending. This article explores the facts behind these assertions, providing a clearer picture of the economic and political dynamics between the two nations.
Contrary to the assertion that Canada is "one of the highest tariffing nations anywhere in the world," data tells a different story. In 2022, Canada ranked 102nd on the World Bank's list of countries by trade-weighted average tariff rates out of 137, with an average tariff rate of 1.37%. This rate was actually lower than that of the United States, which stood at 1.49% in the same year. These figures highlight Canada's relatively low tariffs, dispelling the notion that it is among the highest globally.
In response to the US imposing new tariffs on Canadian goods, Canada announced a series of retaliatory tariffs. This move was a direct countermeasure to protect its economic interests and to address what it perceived as unfair trade practices initiated by the Trump administration. Despite these tensions, the US trade deficit with Canada was recorded at $35.7 billion in 2024, showcasing the complex interdependence between the two economies.
Agricultural trade between the US and Canada remains robust, with Canada being the second-largest buyer of US agricultural exports in 2024, purchasing approximately $28.4 billion worth of goods. Almost all US agricultural exports to Canada face zero tariffs or quotas, contrary to claims that "they don’t take our agricultural product for the most part." This openness is a significant aspect of the trade relationship, benefitting both nations' economies.
In terms of dairy tariffs, it is important to clarify that Canada's high tariffs only apply after a specific quota of tariff-free dairy imports from the US is reached. This quota was negotiated during Trump's tenure and has not been met in any category of dairy product, meaning these tariffs are not currently in effect. Trump's assertion that Canada's dairy-tariff situation is "well taken care of" overlooks these nuances.
The banking sector also illustrates strong cross-border ties, with US banks operating in Canada for over a century. Today, they constitute approximately half of all foreign bank assets in Canada, demonstrating a longstanding and mutually beneficial financial relationship.
Defense spending has been another point of contention. Trump's claim that Canada spends "less than 1%" on defense is inaccurate. Official NATO figures indicate that Canada spent an estimated 1.37% of its GDP on defense in 2024, reflecting an increase from previous years—1.31% in 2023 and 1.2% in 2022. This upward trend underscores Canada's commitment to its defense obligations within NATO.
As for security concerns, the claim that Canada is surrounded by Russian and Chinese ships is unfounded. There is no evidence to support the suggestion that Canada faces constant maritime threats from these nations.
