The Trade Relationship Between Canada and the United States

Welcome back to TAXING TARIFFS! In this post we’ll be taking a closer look at the trade relationship between Canada and the United States. Taxing Tariffs is sponsored by Micron Corporation we’re “WE BUILD IT BETTER.”

The current President of the U.S. has been using tariffs as a negotiating tool with other countries since his last term in office. Donald J. Trump served as the 45th President of the United States from January 20, 2017 to January 20, 2021 and has been elected to a nonconsecutive second term that started on January 20, 2025. Since the beginning of his second term he has upended U.S. trade relationships with the rest of the world, or at least with America’s most valued trading partners. Primary among them Mr. President is the great and proud nation of Canada.

The United States has had a long and complex relationship with its neighbor to the North. Relations would seem to have settled into their current standing in 1867 when the Canadian Confederation process united three British North American provinces – the Province of Canada, Nova Scotia, and New Brunswick – into one federation, called the Dominion of Canada. In the twentieth century and into this twenty first century Canada and the U.S. have been allies and highly significant trading partners with each other. Political posturing backed by threats of tariffs have currently produced wrangling on both sides.

Americans imported 411.9 $B of goods from Canada in 2024 (the last full year data available): this is from the report “Total Imports: General Custom Value (In Actual Dollars)” from DATAWEB on the United States International Trade Commission website usitc.gov. Total U.S. exports to Canada were 349.9 $B in 2024: “Total Exports: FAS Value (In Actual Dollars).” Here FAS refers to Free Alongside Ship, an Incoterm which specifies the obligations of the buyers and sellers as to the charges involved in 12 different categories. Incoterms were first published by the International Trade Commission in 1936 “to provide internationally accepted definitions and rules of interpretation for common commercial terms used in contracts for the sale of goods.” (CoPilot, Microsoft, 02/01/2026, 10:16 AM, EDT). For more information see incodocs.com. The net result of trade between Canada and the U.S. came to a trade imbalance of -62 $B, or put another way, American companies and consumers combined bought 62 billion U.S. dollars more worth of goods from Canada than Canadian companies and consumers bought from the U.S.

Whatever your take on trade flows and trade “deficits” one thing is certain, the U.S. needs Canada, and Canada needs the U.S. if their economies, lifestyles, and worldviews are to continue. Front and center of this dependent relationship that so often leads to prosperity for both countries is the agreement between the three North American nations Mexico – United States – Canada. Known by the acronyms USMCA or CUSMA or T-MEC depending on if you’re in the U.S., Canada, or Mexico, respectively. There is a July 1 deadline for a “review” of the agreement. The fear is that political rhetoric might push out that deadline which in turn may hobble investment decisions throughout the continent. Let’s hope that doesn’t happen; our shared cosmopolitan perspectives depend on it.

However, the tit for tat continues. In the fourth week of January, Prime Minister Carney reacted to President Trumps 100% tariff threat for Canada’s movement towards free-trade type agreements with China. What Carney did was to start refusing certification (for use in Canada) of U.S.-made aircraft, known as Gulfstream jets, built by Gulfstream Aerospace Corp. In counter retaliation on January 29, Trump threatened to decertify Canadian aircraft and apply more tariffs. You may wonder how this kerfuffle is playing out for both sides. Since their appearances and performances at the World Economic Forum in Davos, Carney’s approval rating at home is up to 60% (Angus Reid Institute), and Trump’s is down to 40% (Pew Research Center) and dropping before the midterm elections. And the tariff tussles continue.

Carney’s foreign policy démarches in Davos and Beijing are testament to the strength of the hand he is playing. Carney knows that Canada’s biggest export to the U.S. is by far its oil and gas that are piped to its neighbor’s refineries to the south through vast and varied networks. There are at least 12 major companies involved in the complex of natural gas pipelines, and at least twice as many named Canadian and U.S. oil pipelines. This is not a network that is going away or going to be replaced anytime soon. Canada is playing with a fifth of its gross domestic product and three-quarters of its exports on the table. I’d say they’re all in. Trump can bluff and bluster all he wants, Carney need not fold.

What do you think about the United States’ relationship with Canada? Or, for that matter, what about relations between Canadians and Americans? Do you worry about the future of the triply named USMCA – CUSMA – T-MEC agreement? Let us know at INFO@MICRONCORP.COM and we’ll see you next time on TAXING TARIFFS.