US economy undercuts Trump’s claim that America does not need Canada

Tehran - BORNA - Canada also supplies aluminum, potash used on US farms and auto parts for an industry deeply integrated across both sides of the border.

Trump reiterated his longstanding claim this week, writing, “We don’t need Canada, they need us!”

Yet Trump has imposed a 50% tariff on Canadian aluminum, while acknowledging this week that the United States badly needs the metal.

“This country desperately needs aluminum. We don’t have it. We get most of it from Canada, and we desperately need it,” Trump said.

The contradiction highlights how deeply intertwined the two economies are and how much could be put at risk if Trump’s trade war expands into more of the energy, raw materials and supply chains on which the United States still depends on Canada.

Canada fuels US industry

Canada is the United States’ second-largest trading partner after Mexico, with energy at the heart of that relationship.

The two countries traded about $872 billion in goods and services last year. According to the US Energy Information Administration, imports of Canadian crude oil account for nearly 20% of total US oil consumption.

Daniel Béland, a political science professor at McGill University, said Trump’s claim that the United States does not need Canada is “completely false,” pointing to US dependence on Canadian oil and natural gas as well as deeply integrated industries such as auto manufacturing.

Much of Canada’s crude flows to refineries in the US Midwest that are specifically configured to process its heavy oil into gasoline, diesel and jet fuel.

Energy also explains a large portion of the US trade deficit with Canada, which Trump frequently cites as evidence of what he calls an unfair relationship.

The White House this week portrayed that relationship in starkly negative terms, saying Canada had received nearly $50 billion a year from the United States over the past decade.

A large share of that gap, however, reflects US purchases of Canadian energy that help support the American economy. According to the EIA, Canadian heavy crude also typically trades at a discount to US benchmark oil.

Energy accounted for more than $48.3 billion of the US goods deficit with Canada last year. Excluding energy, the United States would have recorded a trade surplus.

After trade talks collapsed last Friday, the United States imposed 50% tariffs on around $20 billion worth of Canadian goods. The measures cover only about 5% of Canadian exports to the United States and do not include energy.

Canadian politicians debate using energy exports as leverage

For now, using oil as a weapon in trade negotiations remains unlikely.

Alberta Premier Danielle Smith has opposed restricting energy exports, arguing that such a move would hurt her province.

Former Alberta premier Jason Kenney, however, said Canada should not rule out export taxes on oil, fuel or potash if Trump escalates tensions further.

Such retaliation, Kenney said, “would affect Republicans driving Ford F-150s and spreading fertilizer on their farms.”

“They need to understand that if they really want to escalate this, two months before the midterm elections, it is not going to end well for the US economy,” he said.

Ontario Premier Doug Ford has also pointed to Canadian commodities as leverage, accusing Trump of “spreading fake news” by claiming the United States does not need Canada.

Ford described potash used by US farmers as “one of the most powerful tools we have,” saying Washington would have to turn to suppliers such as Russia if Canada redirected shipments elsewhere.

Kenney stopped short of explicitly endorsing export taxes, while Béland said such a move would likely be “very politically divisive” in provinces such as Alberta and Saskatchewan.

The debate highlights the limits of Canada’s leverage: measures designed to hurt US industries could also damage Canadian producers and weaken political unity at home.

From pickup trucks to farms

Canada has long been the main foreign supplier of aluminum to the United States.

Smelting aluminum requires huge amounts of electricity, giving hydro-rich Canada a significant advantage.

Canadian Prime Minister Mark Carney told a business audience in New York in May that Canada’s aluminum exports to the United States are equivalent to the energy generated by 10 Hoover Dams.

US farmers are even more dependent on Canada for potash, an essential fertilizer used for crops such as corn and soybeans.

More than 80% of US potash imports come from Canada.

Even Trump’s own ambassador has rejected the idea that the United States needs nothing from its northern neighbor.

“We need potash,” US Ambassador Pete Hoekstra said in June, referring to Canada’s fertilizer supplies.

The auto industry

According to the Canadian government, Canada and the United States have built an integrated auto industry in which parts can cross the border as many as six times before final assembly.

Trump said Monday that his administration would impose a 50% tariff on Canadian cars, trucks and auto parts beginning Jan. 1, 2027, after the November midterm elections.

That means a tariff aimed at Canada could also be felt in Michigan or Ohio.

Tax Canadian aluminum, and a US automaker may have to pay more for metal. Tax Canadian auto parts, and the cost of assembling a vehicle in the United States could rise.

AI needs power, and Canada has it

Artificial intelligence is driving up demand for electricity.

According to the Canada Energy Regulator, Canada supplied 85% of US electricity imports in 2023, while Carney has said the country needs to double its power-grid capacity by 2050 through major hydroelectric and nuclear projects.

Carney said Canada could help the United States meet growing electricity demand driven by artificial intelligence.

According to the Associated Press, the deep economic integration between the two countries continues to complicate Trump’s assertion that the United States can do without Canada.

End Article