In a post on Truth Social early Wednesday, Donald Trump claimed his country is financially supporting its northern neighbour.

The U.S. president-elect wrote that 91裸聊视频渨e subsidize Canada to the tune of $100,000,000 a year91裸聊视频� 91裸聊视频� an apparent reference to a previous claim about a $100-billion trade gap 91裸聊视频� and said the imbalance 91裸聊视频渕akes no sense.91裸聊视频�

91裸聊视频淢any Canadians want Canada to become the 51st State,91裸聊视频� he said in the post, made at 3:23 a.m. EST.

In fact, the U.S. trade deficit sat at US$41 billion in 2023, according to figures from the U.S. Bureau of Economic Analysis.

What is a trade deficit?

On the global stage, countries export some goods and services while importing others. A trade deficit occurs when the dollar value of a country91裸聊视频檚 imports is more than its exports.

Each country has an overall global trade balance, as well as various balances with other states they buy and sell with 91裸聊视频� for example, the one between the United States and Canada.

More than $3.5 billion in goods and services cross the border daily, with the U.S. comprising Canada91裸聊视频檚 closest largest trading partner. More than two-thirds of Canadian trade is with its southern neighbour, and Canada is among America91裸聊视频檚 top trading partners as well.

What are key factors behind the U.S. trade deficit with Canada?

It mainly boils down to oil. Virtually all of Canada91裸聊视频檚 crude oil exports and much of its other energy products flow south. Energy exports accounted for more than $177 billion or roughly 28 per cent of Canada91裸聊视频檚 goods exports to the U.S., according to the federal government.

91裸聊视频淚f we exclude oil 91裸聊视频� the U.S. is actually benefiting from this trade relationship,91裸聊视频� said Salim Zanzana, an economist at the Royal Bank of Canada.

The idea that an imbalance necessarily hurts a country is misplaced, said Stuart Trew, director of the trade and investment research project at the Canadian Centre for Policy Alternatives.

91裸聊视频淭his is actually not a problem for the United States,91裸聊视频� he said.

91裸聊视频淚t91裸聊视频檚 actually creating jobs in the United States 91裸聊视频� Most of the oil we send to the United States, at least from Alberta, is refined in U.S. refineries employing thousands of people. And that is then turned into products like plastics, like chemicals, like fuels 91裸聊视频� also in the United States.

91裸聊视频淭he other thing is that they need that oil,91裸聊视频� he added.

That sentiment enjoys support from Alberta Premier Danielle Smith, who posted a similar argument on X in response to Trump.

91裸聊视频淐anada (especially Alberta) sends billions of raw materials (oil, gas, minerals, grain, livestock, timber, etc) to your U.S. refineries and factories which your great American companies and workers upgrade and sell around the world, including back to Canada (we are your biggest customer by a mile),91裸聊视频� she wrote.

91裸聊视频淟iterally millions of good paying American jobs and companies rely on these affordable raw materials from Canada to make trillions of dollars of wealth in your country.91裸聊视频�

Does a trade deficit mean the country91裸聊视频檚 economy is weak?

Trump has both suggested that Canada91裸聊视频檚 trade surplus with the U.S. is a point of pride for Canadians 91裸聊视频� 91裸聊视频渢hey were bragging and got caught!91裸聊视频� he said in a Twitter post in 2018 91裸聊视频� and a point of shame: 91裸聊视频渨e subsidize Canada91裸聊视频�91裸聊视频�

But experts say a trade deficit or surplus is not in itself good or bad.

The focus should be on overall trade and investment between countries, Trew said. If cross-border trade goes up, as it has for decades, both nations can benefit. Each can leverage their comparative advantage in different areas 91裸聊视频� crude oil in Canada and machinery production in the U.S., for example 91裸聊视频� while closely integrating their supply chains in other fields such as automotive manufacturing.

91裸聊视频淭hey export way more services to us,91裸聊视频� Trew noted. 91裸聊视频淵ou turn on Netflix, you turn on Amazon Prime. It91裸聊视频檚 not problematic.91裸聊视频�

He qualified that the massive imbalance in goods trade with China is an issue 91裸聊视频渋f your goal is to enhance your manufacturing capacity,91裸聊视频� since cheaper Chinese-made consumer products can undercut American suppliers.

Why is this not as simple as winners and losers?

Observers suggest Trump is using the trade gap as a pretext to raise tariffs or gain leverage in negotiations around the Canada-U.S.-Mexico free-trade agreement.

91裸聊视频淢r. Trump91裸聊视频檚 method is pretty well known. You hit the other side over the head, force them to react and maybe make concessions, and then you negotiate,91裸聊视频� said former Quebec premier Jean Charest, now a partner at the Therrien Couture Joli-Coeur law firm, in an interview on Wednesday.

Trump has threatened to impose 25 per cent tariffs on all goods from Canada unless it stops the flow of migrants and illegal drugs into the U.S.

Charest stressed the tightly braided supply chains in auto and other manufacturing sectors.

91裸聊视频淚f you put a tariff on it, you91裸聊视频檙e really putting a tariff on yourself,91裸聊视频� Charest said. 91裸聊视频淐omponents that go into building cars may cross the border up to seven times until the final building of a car.91裸聊视频�

What are the ramifications of Trump91裸聊视频檚 fixation on trade gaps and tariffs?

If the incoming president sees trade gaps as an imbalance to be corrected 91裸聊视频� or compensated for 91裸聊视频� the ripple effects would be far-reaching.

91裸聊视频淚t could spread to non-trading industries,91裸聊视频� Zanzana said of potential tariffs. 91裸聊视频淭here91裸聊视频檚 also a risk of retaliatory tariffs, which Canada has done in response to previous tariffs on steel and aluminum.91裸聊视频�

He also cited lower growth, higher inflation, weaker business investment and greater uncertainty as likely outcomes.

Zanzana framed a trade deficit as a form of borrowing. Since the value of imports amounts to less than can be bought out of export sales, 91裸聊视频渢hat shortfall needs to be made up for by selling assets or borrowing abroad,91裸聊视频� he said.

91裸聊视频淏alancing the trade gap, therefore, would essentially require re-balancing economy-wide net borrowing, and the biggest net borrower in the economy is 91裸聊视频� surprise, surprise 91裸聊视频� the federal government.91裸聊视频�

Achieving that goal would be 91裸聊视频渧ery hard91裸聊视频� given U.S. federal deficit levels already stand near record highs, he said.

Charest said Trump91裸聊视频檚 social media post underscores the need to diversify trade rather than remain 91裸聊视频渃aptive to a single American client.91裸聊视频�

91裸聊视频淚 don91裸聊视频檛 think it91裸聊视频檚 useful for us to engage with Mr. Trump on the abrasiveness side,91裸聊视频� he said.

91裸聊视频淏ut he does shed light in a brutal way on the fact that we as a country have to rise above the circumstances in which we are now and redefine our place relative to the United States, relative to the rest of the world.91裸聊视频�