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US trade deficit with Canada is no 'subsidy': TD Bank

US trade deficit with Canada is no 'subsidy': TD Bank

Calgary, 21 January (Argus) — The US' trade deficit with Canada is largely a result of America's thirst for energy and should not be confused with a "subsidy", according to one of Canada's largest banks today. "With respect to (US president Donald) Trump's assertion that the US subsidizes Canada to the tune of US$200bn per year, it's unclear where this number is derived," TD Economics said today in its Setting the Record Straight on Canada-US Trade report. "In any event, rather than a subsidy, the US trade deficit is a by-product of US economic outperformance relative to other countries. "The bulk of the US trade deficit with Canada is owing to energy," the bank said. "Outside of that, the scales tip into America's favour." The US is on track to record a trade deficit with Canada of roughly C$65bn ($45bn) in 2024, but that would flip to a C$60bn surplus for the US if energy were removed from the equation, said the bank. About 80pc of Canada's 5mn b/d of crude production is consumed by refineries in the US, with many in the Midcontinent having no practical alternative. US gasoline prices would move higher by 30-70¢/USGif the 25pc tariffs that Trump has threatened were applied to Canada's oil, TD Bank projects. But even with energy included, the US' deficit with Canada only represents 4pc of the US' overall trade deficit, meaning "reducing imports from Canada would barely move the needle," according to TD. The two highly-integrated countries exchange about C$3.6bn of goods and services each day, only slightly less than daily US-Mexico trade, the bank said. North American trade disparities have been thrust into the spotlight with Trump threatening tariffs against both of its neighbours. Trump opted not to impose any tariffs immediately when he took office on Monday, as previously threatened, instead pushing potential action against Canada and Mexico to 1 February. Trump said Monday he would immediately begin an "overhaul" of the US trade system to protect domestic workers and to start to "tariff and tax foreign countries to enrich our citizens". Mexican crude could help fill the void left by a reduction in Canadian crude flows, but that would exacerbate the trade deficit that the US has with that country, TD said. Mexico accounts for 20pc of the US' overall trade deficit — five times that of Canada — while China makes up the largest slice of the total US trade deficit, at 30pc, according to TD Bank, which cited official US Census data. The report also highlighted that Canada is the single-largest market for American goods, with at least 34 states selling more to Canada than to any other foreign country. By Brett Holmes Send comments and request more information at feedback@argusmedia.com Copyright © 2025. Argus Media group . All rights reserved.