BUSINESS

If Trump Thinks He Doesn't Need Canada, He's In For A Yuge Surprise

01/24/2017 03:31 EST | Updated 01/24/2017 06:27 EST

“If our partners refuse a renegotiation that gives American workers a fair deal,” the White House website declared last Friday, “then the President will give notice of the United States’ intent to withdraw from NAFTA.”

It’s that sort of brimstone rhetoric that has many in Canada (and Mexico, and around the world) worried about the Trump administration’s declaration that it means to move forward with an overhaul of the North American Free Trade Agreement.

But trade isn’t a one-way street, and though Canada relies more heavily on foreign trade than the U.S. does, many parts of the U.S. rely on Canada as well. Just as that nation is Canada’s largest export market, so too is Canada the largest export market for 35 U.S. states, according to data from the U.S. Census Bureau.

states dependent on canada

“The strong trade linkage with the traditionally manufacturing-focused northern U.S. states reinforces how trade with Canada supports American jobs, both directly and through supply chain employment,” TD Bank senior economist Brian DePratto wrote in a report Tuesday.

That’s the sort of economic reality many experts are saying Canada should bring to the NAFTA table, when the time comes to renegotiate.

Here’s another: There’s nothing dysfunctional about the trade relationship between Canada and the U.S. Until the financial crisis of 2008-09, Canada ran a strong trade surplus with their southern neighbour (more money flowing to Canada than to the U.S.) but since that time, trade has been just about evenly balanced.

And that “includes significant oil and gas exports which, even with the shale oil revolution, the U.S. could never replace with its own domestic production,” wrote Paul Ashworth of Capital Economics.

He noted that “Canada actually runs a deficit with the U.S. in machinery and transport equipment goods” — meaning U.S. manufacturers in those sectors are more dependent on Canada than vice versa.

But while Canada can bring a strong hand to the table, it can’t avoid the reality that the Great White North is more dependent, overall, on foreign trade than the U.S.

canada trade reliance

Still, reopening NAFTA “should be considered an opportunity for Canada,” DePratto wrote.

“There are many elements of the agreement (and the overall trading relationship) that could be strengthened, and which could result in economic benefits for both nations.

"Canada needs to nail down a list of areas where Canadian and U.S. interests are likely to be aligned, including security, infrastructure, dispute resolution and energy. This could form the basis of negotiation.”