Is Trump Right About Trade With Canada? It Depends Who You Ask

(Bloomberg) -- The debate whether the U.S. runs a trade deficit with Canada has surfaced once again.

President Donald Trump tweeted on Thursday that America does indeed have a deficit with its northern neighbor. Trump’s tweet followed a Washington Post report that he acknowledged at a fundraiser he didn’t know whether the assertion was true when he made the claim to Canadian Prime Minister Justin Trudeau.

It’s an important point because Trump has repeatedly threatened to get tough on countries that run a surplus with the U.S.

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

Even if he was just going on a hunch, is he right?

It depends on what data are used. Canadian officials such as Foreign Affairs Minister Chrystia Freeland, who disputes the claim the U.S. is running a deficit with Canada, tend to use U.S. figures to make their case. America’s Bureau of Economic Analysis has calculated the U.S. has run surpluses -- including goods and services -- with Canada in the past three years. Ironically, Statistics Canada data show Canada has run surpluses with the U.S. for 36 years straight.

The Canadian statistics agency released a lengthy report on the discrepancy last month, explaining that a big portion of the differences have to do with how countries account for re-exports.

Of course, since it’s the Trump administration crying foul, Canadian officials say it’s only fair to use the U.S. government’s own assessment of trade imbalances.

No matter which methodology is used, the trade balance has been in Canada’s favor for a very long time until it began to even out recently. Canada has run a cumulative surplus totaling C$1.1 trillion ($843 billion) since 1999, according to Canadian figures, thanks in large part to oil shipments. The U.S. data measures the U.S. trade deficit at $548 billion over that time.

--With assistance from Erik Hertzberg

To contact the reporters on this story: Theophilos Argitis in Ottawa at targitis@bloomberg.net, Josh Wingrove in Ottawa at jwingrove4@bloomberg.net.

To contact the editors responsible for this story: Sarah McGregor at smcgregor5@bloomberg.net, Randall Woods, Stephen Wicary

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