Reality check: No, the U.S. doesn’t have a $17B trade deficit with Canada

Click to play video: 'Trump talks NAFTA during meeting with GOP senators'
Trump talks NAFTA during meeting with GOP senators
U.S. President Donald Trump was expected to discuss NAFTA and massive trade deficits with Mexico and Canada during a meeting with Republican senators on Tuesday – Dec 5, 2017

U.S. President Donald Trump inflated the trade numbers with Canada when talking with Republican members of the Senate Tuesday afternoon.

The comments came as Trump met a half-dozen Republican senators, who urged him not to start cancelling the North American Free Trade Agreement (NAFTA), which Trump has threatened to do as a bargaining tactic.

During his opening remarks he brought up NAFTA negotiations and trade deficits while talking about his tax plan.

“We have trade deficits with everybody. Virtually every country in the world we have trade deficits with,” he said.

“We have tremendous losses with Mexico and losses with Canada, and covered by NAFTA.  Last year, we lost approximately $71 billion in trade deficit; we have a trade deficit with Mexico of $71 billion. With Canada, it was about $17 billion.”

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Those numbers differ from numbers provided by Statistics Canada, and the Office of the United States Trade Representative – both say the U.S. has a trade surplus with Canada, to the amount of US$12 billion.

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The number is more in line with the trade deficit for goods, explained Robert Wolfe, professor emeritus for Queen’s University’s School of Policy Studies.

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The U.S. does run a deficit of around US$12 billion in goods.

“But trade is composed of trade in goods as well as trade in services,” Wolfe explained – according to U.S. statistics there is a surplus of around US$25 billion.

That makes the overall surplus around US$12 billion.

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“So the real trade balance with Canada is positive in the U.S.’s favour,” Wolfe said.

As for the Mexican numbers, according to the U.S. trade office, the U.S. trade deficit with Mexico is $55.6 billion, which is around $16 billion dollars less than what Trump said.

The rhetoric is common for Trump who has been bemoaning the U.S.’s trade deficits since he started on the campaign trail.

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But Wolfe said running a deficit isn’t necessarily a sign of a bad economy.

“When the economy is doing very well as it has been doing all year … the result is that the U.S. sucks in imports from around the world because Americans are spending money and the result is the trade deficit goes up,” he explained.

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He said when Trump makes comments like this, it puts undue pressure on U.S. NAFTA negotiators – who are currently still deadlocked with their Canadian and Mexican counterparts.

One of the senators present at Tuesday’s meeting, Iowa’s Joni Ernst, said she raised her concerns over cancelling the trade agreement with the president and with U.S. trade czar Robert Lighthizer.

“Today, I stressed to (them) the importance of maintaining NAFTA and the duty-free access our (agriculture) products enjoy under it,” Ernst said in a statement later.

“Trade plays a critical role in Iowa’s economy and I reiterated to the administration the importance of ensuring Iowans remain competitive in the global market – provided our trading partners are operating on a level playing field.

The next round of NAFTA talks will take place in the new year in Montreal.

*with files from the Canadian Press

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