Economists debunk Trump's Twitter trade 'facts' against Canada

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 toanother level after he left the summit early and then attacked Canadian Prime Minister Justin Trudeau on Twitter using wordssuch 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 Canadais charging U.S. farmers, workers and companies "massive tariffs."

But how accurate is the data that Trump vows are facts in histweets?

Derek Holt, vice-president ofScotiabankEconomics, 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.

Holt said Trump's use of the 270 per cent tariff to "besmirch" Canada's overall trade policies is "disingenuousto 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 CIBCWorld Markets, also pointed out thatCanada's supply management and quotas on dairy products meant to stabilize the market are similar toalmost every country that has some legacy supply-managed industries, includingthe U.S. which subsidizes dairy products, along withimport 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."

'Fool Trade'

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.

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 blamingother countriesfor 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 centand 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 centof 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 disputebetween Canada and the U.S.when he imposed tariffs on Canadian steel and aluminum imports fromthe start of June, he went on to tweetthat 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.

Mendes saidtariffs 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 centof 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 toshooting oneself in the foot for the U.S. administration."