Canada, the Petroyuan Thesis, and Balance of Trade Issues in Pictures

As NAFTA negotiations linger on, let's step back and see what Trump's threats are all about.

The US has had a goods surplus with Canada every month since 1985.

Nonetheless, Trump is incredibly annoyed at Canada and threatens to put tariffs on Canadian cars.

Well, Trump better make that US cars because Canada does not have any Canadian car brands.

The US would lose far more from Canadian tariffs on cars than vice-versa. But both sides would lose in such a war.

Tariffs are a tax on consumers. No one wins from them.

For now, Canada says it will Stick to its Guns at NAFTA Talks Despite Trump Pressure.

> Canadian Prime Minister Justin Trudeau indicated on Tuesday that Canada would not compromise on key demands at high-level talks this week with the United States to update the North American Free Trade Agreement.

> “No NAFTA is better than a bad NAFTA deal for Canadians and that’s what we are going to stay with.”

> U.S. President Donald Trump - who signed a NAFTA side deal with Mexico last week - has threatened to impose auto tariffs on Canada or exclude it from the three-nation pact unless an agreement can be struck quickly.

> Trudeau made clear, however, he would insist on keeping the so-called Chapter 19 dispute-resolution mechanism that Washington wants to scrap.

> “We will not sign a deal that is bad for Canadians, and quiet frankly, not having a Chapter 19 to ensure the rules are followed would be bad for Canadians,” he said.

> He also said existing protections that ban U.S. media firms from buying Canadian cultural industries such as television stations and newspapers must be maintained.

Legitimate Gripes and Plain Silliness

Trump has a legitimate gripe about dairy products, but the US sugar, corn, an ethanol lobbies are just as bad if indeed not far worse.

US tariffs on Canadian lumber are ridiculous. Housing is already slowing high prices for lumber do not help.

Canada ought to propose scrapping all tariffs but even if Trudeau made such a proposal, Trump would not accept it.

Here's the broad picture.

US Balance of Trade 2011-2017

I created the above chart from downloads of these three Census Department files.


  • Hong Kong, Singapore, and Taiwan were added in 2015.
  • The format of the reports changed in 2014, but that link has annual totals that date back to 2011.
  • Prior to 2014 there was no Exhibit 20 (selected countries).

Laughable Concern Over Canada

While it's true the US has had a continual goods surplus with Canada, the overall balance of trade with Canada has not been consistently positive.

Yet, for three straight years, the US has had a surplus with Canada, including services.

Check out this reporting from Reuters writers Jason Lange, David Ljunggren on this month's trade deficit surge.

"The shortfall with Canada shot up 57.6 percent."

Irony abounds. In one quarter, possibly related to Trump tariff repercussions themselves, the goods deficit rose.

Here's the real picture.

Mid-year 2018, the US is still running an overall trade surplus with Canada, so this will likely be the fourth year the US records a trade surplus with Canada (total the first two highlighted columns).

Nonetheless, Trump is moaning. And the global chart shows it's over very insignificant totals.

This is the true nature of the "worst trade deal in history" where Canada is now more important than Mexico.

Spotlight South America

The US has tariffs on Brazilian sugar and Ethanol despite the fact the Us runs a trade surplus with the region.

We call higher gas prices and higher sugar prices "winning". Yes, it's insane.

Spotlight OPEC

Notice OPEC and Saudi Arabia. For three straight years the US has had a trade surplus with the Mideast.

All this silly talk about the Petroyuan and dumping dollars is a direct result of this trade shift. The OPEC countries are not dumping reserves because they want to, it's because they have to.

The Petroyuan does not represent the demise of the dollar, but rather a huge problem for OPEC. They are burning US dollar reserves at a substantial rate. The US is increasingly energy independent but it's not quite there yet.

Moreover, the Petroyuan barely trades because it's not liquid. The entire Petroyuan discussion is much ado about nothing from a US perspective but it is a problem for OPEC.

Mike "Mish" Shedlock

Comments (5)
No. 1-3

Trump may view increasing prices to consumers via tariffs to be positive. After giving richer Americans tax break he can now essentially shift taxes disproportionately to middle and lower classes with tariffs. Inflation (printing money to pay debt) has been a Republican strategy for a long time. The problem with tariffs is that rebalancing the economy is massively disruptive and costly in the short term.


Trump does NOT have a legitimate gripe against Cdn dairy tariffs. If the US were not dumping subsidized milk, then perhaps there would be reason for a challenge. As it is, the subsidies hurt the target population (smaller dairy farms), and Canada would be crazy to open up a healthy dairy sector that costs the government nothing to subsidized produce from the US (from an unbalanced dairy sector with farmers being driven to suicide). It contintues to amaze me that Trump gets to frame all these discussions in terms of erroneous facts. The press is doing very little to correct the misinformation Trump keeps repeating. (What is the contribution of the US to the NATO budget? 22%)


As always, this has nothing to do with the truth. Virtually everything Trump says is a lie, but that doesnt matter to Trump, or to his supporters. The morons who believe him are desperate to focus their anger on someone and Trump obliges by making up enemies for them to hate. The politics of hate is a powerful weapon. Trump may be illiterate, innumerate, and immoral, but he does know how to garner support with the politics of hate. Thats why theres no point in making a deal with him in the first place. He will find a way to renege on that deal almost immediately, because he needs enemies to focus his supporters anger. If theyre busy hating the Canadians, Europeans, Chinese, Koreans, Mexicans etc they wont be paying attention to how inept he is. Thats why he will put off signing a deal with anyone for as long as possible. He would lose an enemy. His whole world is about creating enemies, and now he is dragging the rest of America into his world. America is beginning to lose all its friends and allies, thanks to Trump. Canada has become a country that has been abusing the US for decades! Even though the US has been running a trade surplus with Canada every month since 1985 (33 years!), Trump blasts Canada. And his supporters believe him. I feel sorry for Americans. I also feel badly for Americas allies. They have become collateral damage in Trumps war with everyone.