Judging by the way U.S. President Donald Trump talks about America’s growing trade deficit with Canada, it’s hard not to come away thinking that our northern neighbor has pulled a fast one, living high on the hog at the expense of hard-working Americans.
The way Trump puts it, the U.S. is "subsidizing” Canada to the tune of $200 billion a year. As any Econ 101 student knows, that’s not how international trade works.
Just take a look at the dismal performance of the Canadian dollar, which just fell to its weakest since the start of 2016. The truth is that the loonie has been broadly depreciating since 2011, a stark testament to the structural economic deficiencies that have long ensnared the country. This latest dip suggests the currency market has concluded that not only are there no good outcomes to be had from Trump’s fixation on the U.S. trade deficit with Canada, but that further harm will come from the ill-advised response by Canada’s leaders to the threats of tariffs.
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