In each EconMinute, Business Council of Alberta economist Alicia Planincic seeks to better understand the economic issues that matter to Canadians: from business competitiveness to housing affordability to living standards and our country’s lack of productivity growth. She strives to answer burning questions, tackle misconceptions, and uncover what’s really going on in the Canadian economy.
President Trump’s view of trade is that it is something that can be won or lost, and, when it comes to Canada, he feels he’s losing. One of his (many) comments that made waves last week was that the U.S. was losing “$200 billion a year and more” to Canada, representing what he called a massive subsidy to its northern neighbour.
For some context, there’s a lot of trade that flows between the two countries—amounting to well over $700 billion dollars (USD) worth of goods in any given year.Numbers that appear here are custom-based statistics where imports are determined based on where a product was grown or manufactured. These numbers will differ from Balance of Payments data where imports are determined based on the country of product ownership. While Balance of Payments may be preferred to understand trade overall, custom-based statistics offer greater detail that allow for product–level analysis such as that of crude oil. More money and goods are exchanged between Americans and Canadians than nearly any other two countries in the world.
Is the U.S. short $200 billion a year on trade with Canada? Technically, yes. At least when it comes to physical goods which has long been Trump’s focus. Americans buy significantly more stuff from Canada than Canadians buy from America. As of 2022, Americans spent about $460 billion on Canadian products while Canadians only spent about $281 billion on American products. That difference of $179 billion (which has since widened) is what Trump was referencing in his remarks.
But while decreasing the trade deficit would mean “winning” in Trump’s view, it would be disastrous for the American economy.
Americans buy Canadian goods not because they have to but because they want to. This includes the many products President-elect Trump mentioned in his remarks such as Canadian cars and lumber. But it also includes an important product he didn’t mention and the one that accounts for the lion’s share of the trade deficit: crude oil.
Americans buy about $100 billion worth of Canadian crude a year. If the U.S. stopped buying Canadian oil alone—either because the incoming administration placed a trade barrier on imports or because the Canadian government did so as retaliation—the trade deficit would immediately and substantially shrink down to around $60 billion.

Graphic credit: Janice Nelson.
But Americans buy Canadian oil—amounting to over 60 percent of American crude imports—for a reason: it’s cheap, reliable, and keeps the American economy going. Without it, American consumers would have to pay more for gas. A simple back-of-the-envelope calculation suggests that if imports from Canada were replaced with U.S. production (assuming that U.S. companies receive world prices for their oil), it would cost Americans an additional $19 billion annually just to get the same amount of crude oil they’re getting from Canada now. And that figure ignores other complicating factors like the limitations of U.S. refineries and the time it would take to ramp up production.
They’d also have to divert resources to produce the goods they currently import from Canada. To use a personal example, I might have a trade deficit with Superstore, but I quite like buying my groceries there rather than spending my time growing produce, making yogurt, and baking bread.
Similarly, Americans could produce more of the things they currently buy from Canada. However, doing so would require redirecting American resources away from their most productive use—a move that would not only impose significant costs on American consumers but also have a detrimental impact on American incomes.
A version of this post was originally published by the Business Council of Alberta at businesscouncilab.com.