Trump’s bluster hides weak hand

Opinion

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This article was published 25/01/2025 (237 days ago), so information in it may no longer be current.

U.S. President Donald Trump is bluffing. He says America doesn’t need the goods, commodities and services that Canada currently supplies to America. He’s wrong and the world knows it.

In a virtual appearance before delegates to the World Economic Forum in Davos, Switzerland, on Thursday, Trump said this: “We have a tremendous deficit with Canada. We’re not going to have that anymore. We can’t do it … We don’t need them to make our cars, and they make a lot of them. We don’t need their lumber because we have our own forests. We don’t need their oil and gas. We have more than anybody.”

He then aimed his remarks directly at Canadians, saying that “You can always become a state, and if you’re a state, we won’t have a deficit. We won’t have to tariff you.”

It isn’t hard to dismantle what Trump is saying, beginning with his assertion that the U.S. is running a “$200-billion or $250-billion” deficit with respect to its trading relationship with Canada. To the contrary, a study by the U.S. government’s Bureau of Economic Analysis found that the U.S. goods and services trade deficit with Canada was approximately $40.6 billion in 2023.

The only reason there is any trade deficit at all is because of the voracious appetite in the U.S. for our low-cost, discounted oil — to the tune of approximately four million barrels of Canadian crude every day of the year. Without that oil, which helps to keep U.S. gasoline prices low, the U.S. would be running a large trade surplus vis-à-vis Canada, not a deficit.

Beyond the role that Canadian oil plays in lowering gasoline prices in the U.S., there is also the reality that the heavy crude oil produced in Western Canada is the specific type of oil required by many U.S. refineries for processing. They were designed to process heavy crude, and it would take years and cost billions of dollars to convert them to be able to refine the thinner form of low-sulphur crude oil that is produced in states such as Texas and Louisiana.

If our Canadian crude oil was not available to those refineries, many of them would be forced to shut down, and that would cause thousands of U.S. job losses. Such a situation would also cause a spike in U.S. gasoline costs, which would quickly translate into an increase in the cost in the U.S. of a huge range of goods and products, including groceries.

Trump says Americans don’t need our lumber products, but a recent Bloomberg news report confirmed that the U.S. is not nearly self-sufficient in lumber. In the absence of reliable Canadian lumber imports, the report said, the U.S. would be forced to make up the shortfall with lumber imported from Scandinavia.

Shutting out the supply of Canadian lumber, or making it more expensive via tariffs, would make both residential and commercial construction much more expensive in the U.S. Beyond that, does Trump seriously believe that fire-ravaged Los Angeles and other U.S. communities can be rebuilt without Canadian lumber?

On the issue of auto manufacturing, the North American auto industry depends on an intricate relationship between plants in Canada, the U.S. and Mexico in order to assemble millions of new cars and trucks annually. Closing the Canada-U.S. border to Canadian-manufactured vehicles and auto parts would quickly have a devastating impact on U.S.-based auto makers. It would disrupt production for years, would cause the price of vehicles and parts to rise, and would result in widespread job losses in many American states.

With all of those facts in mind, it is apparently obvious to everybody other than Trump that he is playing with a far weaker hand than he lets on.

He’s bluffing when he says the U.S. doesn’t need Canada’s oil, gas, lumber and autos. He knows that an embargo on Canadian goods, commodities and services — or even the imposition of tariffs — would have an instantaneous, devastating impact on the U.S. economy. Everything from groceries to cars to two-by-fours would be more expensive, and thousands of Americans would quickly be jobless.

Trump says that Canadians can avoid the impact of his tariffs if we agree to become America’s 51st state, but he’s speaking to the wrong audience. The people who should really be fearful over the potential economic impact of his threatened tariffs, however, are Americans. They will be the real victims of Trump’s reckless game-playing.