Economists debunk Trump's Twitter trade 'facts' against Canada
Economists say there are 'factual errors' in the Twitter attack on Canada by the U.S. president
U.S. President Donald Trump made some "factual errors" in tweets about trade with Canada following the G7 summit, and his tariffs threats could be "akin to shooting oneself in the foot," economists tell CBC News.
Trump's criticism of U.S. trade with Canada escalated to another level after he left the summit early and then attacked Canadian Prime Minister Justin Trudeau on Twitter using words such as "dishonest" and "weak."
Trump cited "facts" such as Canada's 270 per cent tariff on dairy imports and a $100-billion trade surplus against the U.S. as evidence that Canada is charging U.S. farmers, workers and companies "massive tariffs."
But how accurate is the data that Trump vows are facts in his tweets?
Derek Holt, vice-president of Scotiabank Economics, said the "thought processes" at the core of the U.S. administration are not grounded in "reason, diplomacy or facts."
"A trio [Trump and top advisers Peter Navarro and Larry Kudlow] of fast-talking gunslingers in the U.S. administration defamed Canada's institutions, leadership, values and policies over the weekend," said Holt, in a note on Monday. "The vulgarity of the remarks is worth a recap before turning to the factual errors that are behind their beliefs."
270% tariff on dairy
Trump's blistering Twitter attack on Trudeau on Sunday started with a tweet about Canada's 270 per cent tariff on imports of U.S. dairy products.
PM Justin Trudeau of Canada acted so meek and mild during our <a href="https://twitter.com/g7?ref_src=twsrc%5Etfw">@G7</a> meetings only to give a news conference after I left saying that, “US Tariffs were kind of insulting” and he “will not be pushed around.” Very dishonest & weak. Our Tariffs are in response to his of 270% on dairy!—@realDonaldTrump
Holt said Trump's use of the 270 per cent tariff to "besmirch" Canada's overall trade policies is "disingenuous to be polite about it."
"That's right, Trump is quoting a figure that applies to milk that accounts for a tiny fraction of Canada's $33 billion of goods imported from the United States each month," Holt said. "Better judgment would question whether an entire trading relationship needs to be jeopardized in order to appeal to dairy farmers in Wisconsin."
Royce Mendes, senior economist at CIBC World Markets, also pointed out that Canada's supply management and quotas on dairy products meant to stabilize the market are similar to almost every country that has some legacy supply-managed industries, including the U.S. which subsidizes dairy products, along with import quotas on sugar.
"Dairy is a small portion of overall trade between the two countries. Supply management is being trumped up as having more economic implications than it actually does," Mendes told CBC.
"While they might provide friction between trading partners, import quotas among most developed nations are not on a scale that should cause a breakdown of the global trading system."
Trump then went on to tweet that "fair trade" between Canada and the U.S. is now called "Fool Trade" if it is not reciprocal, citing Canada makes almost $100 billion in trade with the U.S.
Fair Trade is now to be called Fool Trade if it is not Reciprocal. According to a Canada release, they make almost 100 Billion Dollars in Trade with U.S. (guess they were bragging and got caught!). Minimum is 17B. Tax Dairy from us at 270%. Then Justin acts hurt when called out!—@realDonaldTrump
Why should I, as President of the United States, allow countries to continue to make Massive Trade Surpluses, as they have for decades, while our Farmers, Workers & Taxpayers have such a big and unfair price to pay? Not fair to the PEOPLE of America! $800 Billion Trade Deficit...—@realDonaldTrump
Mendes said Canada ran a $40 billion goods trade surplus with the U.S. last year, according to Statistics Canada and it was even less according to the U.S. Bureau of Economic Analysis, which put the figure at $30 billion.
"If you include services, trade between the two countries is roughly balanced," Mendes said. "Either way, most of the goods surplus we have with the U.S. is related to energy. I'm guessing most Americans wouldn't want us to turn off the taps and cause U.S. fuel prices to skyrocket."
Holt added that Trump constantly blaming other countries for his country's trade deficits is a deflection tactic.
"Is it because everyone treats the U.S. as its piggy bank as Trump asserts? Hardly. Part of the problem is that the U.S. lost its piggy bank a long time ago," Holt said, referring to a statement made by Trump last week.
Holt said the U.S. doesn't save enough at the national level relative to what it invests and consumes to have a "piggy bank."
"One example is the personal saving rate that now sits at just 2.8 per cent and is at its lowest on record. Another is decades of fiscal deficits; over the past half century, the U.S. has only run surpluses for a meaningful period in the late 1990s and early 2000s," said Holt.
"The deficit-to-GDP ratio is projected to blow out to almost 10 per cent of GDP over the longer term, because of unfunded social security and health-care costs, while the U.S. can't afford Trump's fiscal policy stimulus."
Risk from auto tariffs
Despite Trump starting the tariff dispute between Canada and the U.S. when he imposed tariffs on Canadian steel and aluminum imports from the start of June, he went on to tweet that Canada is charging the U.S. "massive tariffs" and threatened to impose tariffs on automobiles from Canada that he says are "flooding" the U.S. market.
Based on Justin’s false statements at his news conference, and the fact that Canada is charging massive Tariffs to our U.S. farmers, workers and companies, I have instructed our U.S. Reps not to endorse the Communique as we look at Tariffs on automobiles flooding the U.S. Market!—@realDonaldTrump
Mendes said tariffs on automobiles would pose a far more serious risk to the Canadian economy than those implemented by the U.S. on steel and aluminum.
"Autos [and related parts] represent just under 20 per cent of our goods exports to the U.S. The products covered under the steel and aluminum tariffs are only about four per cent," Mendes said.
"However, the U.S. administration should tread carefully. A major portion of the automotive products we ship south are made up of U.S. parts."
With an extremely integrated auto industry in North America, Mendes said the tariffs could turn out "to be akin to shooting oneself in the foot for the U.S. administration."