Globalization Archives - Centre for Future Work

Stellantis Shows Canada’s Industrial Economy is On the Line

Jim Stanford — Tue, 21 Oct 2025 17:50:08 +0000

Automaker Stellantis recently announced it would shift production of a new vehicle from an assembly plant in Brampton, Ontario (which has been closed for re-tooling) to Indiana, in order to escape the effects of Donald Trump’s 25% tariff on Canadian-assembled vehicles. This decision seems to confirm the worst fears of Canadian economists regarding the long-run impact of Trump’s trade war: by weaponizing access to the U.S. market and pressuring global companies to relocate long-run investments to the U.S., Trump would shatter the viability of continued production in Canada and other countries.

In this commentary, originally published in the Toronto Star, Centre for Future Work Economist and Director Jim Stanford highlights the dangers of this decision – not just for the automotive sector, but for all other high-tech industries targeted by Trump’s Section 232 “national security” tariffs. But he also reminds us that Canada is not powerless in this confrontation: Canada’s large and lucrative new vehicle market gives the government great leverage to pressure Stellantis (and other companies) to maintain a proportional footprint in this country.

Here’s how we fight back against the sheer gall of Stellantis’ caving to Trump

By Jim Stanford

As the saying goes, when someone tells you who they are, you should believe them. And where cars are concerned, Donald Trump has been telling us exactly who he is.

He warned in April, “We don’t really want Canada to make cars for us.” Commerce Secretary Howard Luttnick recently confirmed this goal, telling a Canadian audience “car assembly is going to be in America, and there is nothing Canada can do about it.”

So we shouldn’t be surprised that automaker Stellantis is shifting planned production of a new Jeep from its plant in Brampton, to Illinois. This is Trump’s precise goal: weaponize access to the U.S. market, to leverage incoming investment from global companies in strategic, high-tech industries.

Nevertheless, the sheer gall of Stellantis’ action is shocking. It is breaking explicit commitments made to all its key partners: its own workers (in a binding labour contract), the federal and provincial governments (in binding covenants attached to various subsidies), and auto parts companies (which invested hundreds of millions in new tooling and capital for Brampton).

Trump’s 25% tariffs on cars are already exacting a painful toll. Vehicle exports to the U.S. are down 15% year-over-year since they came into effect; that will translate (if sustained) into a $7 billion annual loss. Trump is now implementing a 25% tariff on heavy trucks that will add to the pain.

But the biggest danger to Canada’s auto industry still lies ahead. If corporations respond to Trump’s extortion by shifting long-run investment to the U.S., Canada’s industrial capacity will be destroyed.

That’s why the Stellantis decision cannot stand. It would set a precedent that quickly spreads into all other high-tech industries.

Remember, while the auto industry has high symbolic value, Trump has his trade guns trained on the whole portfolio of Canadian high-tech industries. His tariffs fall into two broad categories.

First, there is a broad across-the-board tariff. But for now, most industries are exempt if they meet existing rules under the Canada-U.S.-Mexico Agreement (CUSMA). Most of those exempted products are resource-based commodities (energy, minerals, other raw materials) that Trump knows are essential to U.S. supply chains.

For a second category of industries, Trump is attacking full force. He is mis-using Section 232 powers under the U.S. Trade Expansion Act that allow him to unilaterally impose tariffs on grounds of “national security.” His claim these imports jeopardize U.S. security is bogus. His true goal is to force global companies in strategic industries to relocate to America.

It’s no coincidence these 232 tariffs are aimed at every one of Canada’s high-tech success stories: auto, trucks, steel and other basic metals, soon to be joined by aerospace, pharmaceuticals, semiconductors, industrial machinery, and more.

Stellantis’s decision is thus a dramatic opening battle in what will be a long, hard war to defend Canada’s status as a modern, industrial country. Yes, we will work to build new export markets, strengthen Canadian content in procurement, and expand trade within Canada. That is vital, and will take time.

In the meantime, we must at all costs defend the successful high-tech industries we have – every one of which is now in Trump’s crosshairs.

Ironically, Trump’s tariffs are clearly hurting U.S. manufacturing, not helping it. They increase input costs for U.S. factories, and create major uncertainty that holds back capital spending (notwithstanding photo-op announcements by obsequious CEOs).

U.S. manufacturing has contracted for seven consecutive months. As of August, the U.S. had lost almost 100,000 manufacturing jobs over the previous year. In contrast, Canada lost just 3,000 manufacturing jobs in the last year.

The major pain being experienced south of the border disproves the passive assumption that Canada has no leverage because of our smaller size. In reality, Canada is not small: we have the tenth largest economy in the world, with 42 million people, well-educated workers, natural riches, and a more stable democracy. The U.S. benefits from bilateral trade as much as we do.

In automotives, Canada has one of the largest and most lucrative vehicle markets in the world. We buy almost 2 million new vehicles per year, worth over $100 billion. Stellantis, and all other automakers, want a piece of it.

Last year Stellantis sold 130,000 new vehicles here – most imported, most of those from the U.S. At present Stellantis mostly avoids Canada’s 25% counter-tariff on vehicle imports from the U.S., thanks to a clever Canadian duty remission program.

And Stellantis benefits from other public supports, including subsidies for retooling that Brampton plant, and ongoing production credits for EV batteries from a new joint venture in Windsor.

All that support is contingent on Stellantis maintaining its production footprint here. It cannot be allowed to walk away from that commitment. The government must confront Stellantis with the full force of a sovereign, wealthy country.

Industry Minister Mélanie Joly has threatened legal action. That should just be the start. Ottawa should threaten full 25% tariffs on all Stellantis imports (costing $1.5 billion per year), until it recommits to completing the tooling at Brampton, paying interim income support to its workforce, and then fully utilizing the plant when it’s finished.

Pushing back against Stellantis will send a signal to companies in every other high-tech industry. If you want access to Canada’s market, Canada’s resources, and Canada’s supply chains, you must maintain a full-fledged production footprint here.

The Stellantis decision also highlights the failure of Ottawa’s strategy to appease Trump – with multiple concessions and personal flattery. While we talk nice, he races full-speed to steal as many high-tech high-wage jobs as he can.

Even worse would be a partial tariff deal that cements U.S. access to energy and other strategic inputs, while hanging our high-tech industries out to dry. By giving away our leverage without protecting our industrial jewels, that would be worse than no deal.

The Stellantis decision is a litmus test of our national courage. We have power to push back against this company, and against the autocrat it is catering to. If we don’t use it, we can expect many more companies to follow in Stellantis’ footsteps.

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Bringing Capital Home Would Boost Canadian Growth, Reduce Trade Imbalance with U.S.

Jim Stanford — Sun, 28 Sep 2025 04:38:42 +0000

Donald Trump claims his aggressive trade actions are justified because of ‘unfair’ trade practices by other countries, that result in big U.S. trade deficits. But the real cause of those perpetual U.S. trade deficits is ongoing capital inflows to the U.S. from other countries – including Canada. In this commentary originally published in the Toronto Star, Centre for Future Work Director Jim Stanford shows that Canada is now a huge net lender to the U.S., with a positive foreign investment balance there of $1.6 trillion. Bringing some of that capital back to Canada would not only help to finance the major projects we are undertaking to protect our economy against Trump’s attacks, but they would also help reduce the U.S. trade deficit. Therefore, Donald Trump should thank us!

Let’s Help Donald Trump Reduce his Trade Deficit… by Bringing Our Capital Home

By Jim Stanford

Donald Trump justifies tariffs on Canada and other countries by pointing to the chronic U.S. trade deficit. Since the U.S. imports more from the rest of the world, than it exports, it has a trade deficit.

In 2024 that deficit equaled $917 billion (U.S.). That sounds like a lot, but equaled only 3% of U.S. GDP (smaller than previous years). Canada gets much of the blame in Trump’s rants. Yet we account for just 4% ($35 billion) of that total, tenth among U.S. trading partners.

Trump claims the deficit results from unfair treatment by the rest of the world. America can’t sell more abroad, he cries, because of obvious or hidden trade barriers. By imposing tariffs on all other countries (and even some uninhabited islands), and then using those tariffs to leverage other concessions, Trump predicts America will export more and import less. Voila, the deficit will disappear.

Economists of all stripes, however, ridicule this narrative. Trade deficits are affected by many factors, including differences in macroeconomic performance, changes in competitiveness, and exchange rate fluctuations. But the U.S. deficit is a chronic, structural feature: it has existed for 50 consecutive years.

That is only possible if a country continuously imports capital from the rest of the world, allowing it to pay for its trade deficit. And indeed, every year the U.S. takes in trillions of dollars of capital from other countries.

Those capital inflows come in all forms: loans, equities, derivatives, private equity, property, even cryptocurrency. They originate from many different actors: wealthy investors, investment funds, banks, central banks, and even foreign governments.

In total, those capital inflows are necessarily identical and opposite to America’s trade deficit. Indeed, by definition a country’s capital account (which measures net inflows and outflows of capital) must equal the opposite of its current account (consisting of the trade deficit and other current revenue flows).

America’s ability to attract foreign capital is usually seen as a strength, not a weakness. On average, U.S. investments are highly profitable (largely thanks to the very corporate-friendly structure of taxes, labour markets, and competition policy there). And U.S. assets, including the dollar itself, were long considered safe harbours in an uncertain and volatile financial world. (Under Trump, of course, that reputation is fading fast.)

Massive capital inflows give America (in aggregate) more money to spend in the world economy, than it earns. Far from “subsidizing” Canada and other countries through its trade deficit, it’s America that has its hand out.

So if Trump really wants to reduce the trade deficit, America must stop taking in so much capital from the rest of the world. Here’s where Canada comes in.

There’s been a historic but underappreciated change in our economic relationship with the U.S. over the last generation. We’ve gone from being dependent on incoming foreign investment from the U.S. (whether to build industries or finance deficits) to the opposite. We are now a huge net source of capital for the U.S.

Canada has an investment surplus with the U.S. of $1.6 trillion, or 50% of our GDP. The growth in our U.S. holdings over the last decade closely conforms to the cumulative U.S. trade deficit with Canada over the same time. America needs ‘handouts’ from the rest of the world to finance its perpetual trade deficit – and Canada has done our bit.

Our U.S. investments take all forms: individual holdings, mutual funds, pension funds. Shockingly, our own Canada Pension Plan has half its total assets in the U.S.

Canada can help Trump in his mission to reduce his trade deficit, by bringing some of that capital home. In the face of his attacks, we face an urgent challenge to build a more sovereign and self-reliant economy. We need to diversify not just where we sell exports, but what we sell – breaking free of our precarious reliance on raw resource exports. We need to build infrastructure, high-tech industries, and affordable housing.

All that will require massive amounts of capital – and we have $1.6 trillion sitting in the U.S. So let’s bring it home, including by repatriating some of those tax-subsidized pension investments. That will shrink the U.S. trade deficit.

And Donald Trump should thank us for it.

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Elbows Up for Canada’s Economy

Jim Stanford — Sat, 27 Sep 2025 20:17:59 +0000

On September 15, 40 progressive economists and policy experts gathered in Ottawa for the ‘Elbows Up Economic Summit.’ The Summit was co-sponsored by the Centre for Future Work, the Canadian Centre for Policy Alternatives (CCPA), and several other national civil society organizations. It was co-chaired by Centre Director Jim Stanford and Peggy Nash, Executive director of the CCPA.

The goal of the Summit was to amplify a more holistic and progressive vision for protecting and developing Canada’s economy in the face of Donald Trump’s aggressive trade attacks. A pre-Summit Factbook identified numerous challenges that a genuine nation-building strategy needs to confront, and explained why corporate Canada’s demands (for deregulation, public sector austerity, and more fossil fuel pipelines) would make those challenges worse.

The Summit was covered by several media outlets, including this feature story in the National Observer, and an in-depth interview on Radio Labour (hosted by rabble.ca).

Speakers at the Summit proposed concrete measures that would truly protect jobs, living standards, and the environment despite Trump’s attacks – in key areas such as renewable energy, housing and communities, industrial policies, and the care economy. The Summit’s co-sponsors issued a Communiqué at the end of the day (reprinted below), calling for “a broader and more holistic vision for how Canada can withstand U.S. aggression, and move forward as a full-fledged, capable, democratic, and principled country.”

Summit co-sponsors are now preparing a Compendium of written presentations from the Summit, which will be released in conjuncture with a public webinar in mid-October. Stay tuned for details!

Communiqué from the Elbows Up Economic Summit: Responding to Trump Demands a Holistic, Inclusive, Sustainable National Strategy

U.S. President Donald Trump’s attacks on Canada’s economy and sovereignty confront Canadians with a historic challenge. We must once again demonstrate our shared commitment to building a society that is more than the northern appendage to a much larger continental neighbour. Instead, we must reassert our economic, political, and social determination, and capacity, to chart an independent course.

This moment demands a nation-building economic strategy that enlists the full potential of our people, our skills, our geography, our resources, and our values. After all, those values – including commitments to equity, fairness, inclusion, and the natural environment – are why we desire a viable, independent Canada.

We, the co-sponsors and participants in the Elbows Up Economic Summit, express our shared concern that Canada’s response to Trump’s attacks to date has not acknowledged the breadth and risks of the challenges we face, and the opportunities that the world’s 9th largest economy can provide. Hoping that things can get back to “normal,” or trying to negotiate a trade “deal” with the U.S. President that would likely accept punishing U.S. tariffs on some of our most important industries, allows the U.S. to dictate matters (from defense spending to corporate taxation) that should be decided by Canadians. Moreover, beyond the damage of Trump’s unilateral tariffs, there is more risk and uncertainty facing Canada from the upcoming renewal and review of the full CUSMA. Some business interests argue that appeasing Trump, weakening project approval conditions, cutting taxes and regulations, and doubling down on fossil fuel exports will somehow benefit Canadians and protect against Trump’s attacks; these arguments are both wrong and self-serving.

The Elbows Up Economic Summit catalogued the full spectrum of challenges that must be addressed as we develop and implement a nation-building economic plan. These include:

- Our need to diversify what we sell to world markets (not just where we sell it).
- Our need to invest far more in technology and innovation (including through public channels).
- Our need to protect and grow the non-traded side of the economy (including public and caring services).
- Our need to regulate investment in all parts of the economy (including foreign investment and private equity) so it does not jeopardize the public interest, public services, or public assets.
- Our need to fulfil our international climate commitments.

The Summit also highlighted key opportunities to include in a comprehensive economic strategy to build an independent economy: investments in housing, community, and transportation infrastructure; rapid expansion of renewable energy facilities and other decarbonization initiatives; an ambitious, hands-on industrial strategy to preserve and expand Canada’s capacity to add value to our own resources through advanced manufacturing and technology; and continued investment in public services and the care economy (which equip Canada with the most important economic asset of all: a healthy, well-educated, capable population).

We call on the federal and provincial governments, business leaders, trade unions, and all sectors of civil society to collectively articulate and advance a broader and more holistic vision for how Canada can withstand U.S. aggression, and move forward as a full-fledged, capable, democratic, and principled country.

Canada’s response to Trump must maximize our technological and industrial potential, and resist our country falsely being pigeon-holed as a resource supplier. It must reconfirm our global responsibilities to reduce emissions under the Paris Agreement process. It must prioritize meeting human needs (including housing, infrastructure, public services, and care) as the central goal of economic development. And it must fully respect Canadians’ democratic rights and protections (including of Indigenous peoples) as economic development proceeds.

Following the Summit, we will keep working together to more fully develop a vision for nation-building that reflects these core principles and values. And we urge governments, business, and other stakeholders to respect and protect those values as we work together to defend Canada.

Joint Communiqué from the co-sponsors of the Elbows Up Economic Summit: Canadian Centre for Policy Alternatives, Centre for Future Work, Progressive Economics Forum, Pledge for Canada, Council of Canadians, C40 Centre for City Climate Policy and Economy, Care Economy Team, Elbows Up for Climate.

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A Bad Deal with Trump is Worse than No Deal at All

Jim Stanford — Tue, 22 Jul 2025 10:00:32 +0000

Trade negotiations between Canada and the U.S. are continuing, as the revised August 1 deadline approaches. Reports indicate that despite Canadian concessions (on border security, defense spending, and the Digital Services Tax), the U.S. is refusing to remove current and threatened tariffs on Canadian products. Last week Prime Minister Carney warned Canadians that an eventual deal with the U.S. will likely include continued substantial U.S. tariffs. An emerging narrative from government and business quarters suggests that if tariffs imposed on Canada are lower than on other countries (resulting in a less severe ‘average effective tariff’ rate), then Canada should count this as a victory.

A new report from the Centre for Future Work shows this optimism is unjustified and dangerous. Because Canada’s economy is uniquely dependent on exports to the U.S. (equivalent to over 25% of Canadian GDP), even tariffs that seem relatively favourable (compared to other countries) will still cause disproportionate and unprecedented damage to Canada. Even under favourable assumptions, Canada would still be among the handful of worst-hit countries.

The report shows that Trump’s current and threatened tariffs would exact a painful and lasting toll on Canada’s economy, making us among the worst-hit countries in the world. It also lists seven economic and strategic reasons why accepting a bad deal with Trump on August 1, is worse than reaching no deal. Instead, we should continue to resist Trump’s attacks, both at the negotiating table and through countervailing policy actions.

Contrary to Trump’s claims, Canada holds plenty of valuable cards in the current negotiations, based on our status as the largest export market for U.S.-made goods and services, and a dominant supplier to the U.S. of many vital industrial inputs. The federal and provincial governments should preserve our right to play those cards, while undertaking the other steps required to reduce our dependence on U.S. exports, and build a more sovereign, value-added, sustainable economy in the future.

Please see the full report, A Bad Deal with Trump is Worse than No Deal at All, by Jim Stanford, Director of the Centre for Future Work.

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Giving Donald Trump Some of His Own Medicine on Services Trade

Jim Stanford — Wed, 09 Jul 2025 21:50:24 +0000

The Canadian government recently abandoned its new Digital Services Tax (DST), which since January 1 2024 had collected a 3% levy on all revenue in Canada from sales of digital advertising or marketplace services. The companies which dominate this industry (like Google, Meta, Amazon, or AirBnB) typically avoid most or all normal corporate income tax, by shifting revenue and profits from countries like Canada to tax havens where taxes are low or zero. As a result they pay little toward Canada’s social and physical infrastructure (vital to their own businesses’ success), despite the harm they are doing in many areas of life (such as undermining established mass media). The government abandoned the DST after U.S. President Donald Trump broke off trade talks.

In this commentary, originally published in the Toronto Star, Centre for Future Work Director Jim Stanford argues the DST spat pulled back the curtain on an underappreciated dimension of Canada-U.S. trade: services. Canada incurs a large annual deficit in services trade with the U.S, because of the dominance of U.S. firms in key transborder services sectors – including the giants who will now avoid paying the DST. Services trade is the fastest-growing component of international trade. As Canada gears up to fight the Trump tariffs, leveraging their huge profits in Canada should be part of the negotiating strategy – rather than laying out a welcome mat.

For more detail on the importance of services in Canada-U.S. trade, and the consequent leverage that the Canadian government could exercise in trade talks with Trump, please see our previous report, Who’s Subsidizing Whom (especially pages 16-19).

Canada’s now-abandoned digital services tax was never enough to begin with

By Jim Stanford

Days after U.S. President Donald Trump broke off trade talks with Canada, Ottawa suddenly rescinded its new 3% Digital Services Tax (DST). We all knew bargaining with Trump would be full of drama, threats, and bluster. But Canadians had their elbows up.

Abandoning the DST so quickly, weeks before the July 21 deadline for a deal, is a worrying sign. What will Trump demand next? At any rate, given Trump’s deals with other countries (which are not binding, and leave U.S. tariffs in place), it’s not clear any deal (if reached) will be worth the paper it’s printed on.

The DST fiasco highlights an important but underappreciated dimension of Canada-U.S. trade: services. Trump rages about merchandise imports – stuff that arrives via container ships, trucks, and pipelines. He blames other countries’ supposedly unfair practices for chronic U.S. trade deficits.

This narrative is economically laughable. U.S. deficits (which have persisted for 50 years) reflect ongoing capital flows to America, not mistreatment by foreigners.

Curiously, Trump seldom talks about services trade. But it’s the fastest-growing segment of trade – growing 60% over the last decade (more than twice as fast as merchandise trade), and now making up one-quarter of all trade.

America’s home to the biggest banks, consultants, and tech firms. Their CEOs sat in the front row at Trump’s inauguration. Their global reach and power generates large U.S. trade surpluses in services. That’s why Trump doesn’t talk much about services: his arguments about poor, mistreated America have no relevance.

The DST spat, however, pulls back the curtain on the importance of services in Canada-U.S. trade. According to the U.S. Census Bureau, Canada is the second-largest export market for U.S. services. American firms sold us $90 billion (U.S.) worth last year (and that doesn’t count many digital services which official statistics miss).

Sales of Canadian services to the U.S. are much smaller: $57 billion in 2024. That produced a $33 billion surplus for America.

If the tables were turned, a deficit that big would elicit foaming outrage from Washington. For example, consider Trump’s so-called ‘Liberation Day’ tariffs, announced April 2. They were imposed on merchandise from over 180 countries – and even some uninhabited islands!

Trump claimed these tariffs would offset tariffs and other unfair practices by U.S. trading partners. But the formula for calculating them horrified economists. Trump’s team took the bilateral U.S. deficit with each country, divided by the total volume of imports from that country. They applied two odd additional factors – which magically multiplied to equal one, thus having no impact on the final result. The resulting ratio was then divided by two, for no apparent reason (Trump said because the U.S. is “nice”).

The whole charade is nonsensical – and under pressure from financial markets, Trump quickly postponed them for 90 days (until July 9). But what if his theory applied to Canada-U.S. services trade?

America’s surplus equals 37% of total Canadian services imports from the U.S. Because Canadians (unlike Trump) are genuinely “nice,” we’ll also divide that by two. That implies an 18.5% tariff on all services purchased from the U.S. The DST’s 3% levy (imposed on tech companies which usually evade normal income tax) looks positively easy-going, in comparison.

Incidentally, even on merchandise trade, Trump’s formula would imply a tariff of just 8% on Canadian exports – much smaller than what Trump has already imposed on our steel, aluminum, and cars (and threatened on virtually everything else).

Even by Trump’s perverted logic, we should be taxing U.S. tech giants (and other service providers) far more than the baby-step DST. Canadian negotiators must start to wield the bargaining power that comes with our status as a huge and profitable market for U.S. services firms. Being ready to curtail their access to that market is how we’ll get some leverage, not by rolling out a welcome mat.

There’s no economic rhyme or reason to Trump’s demands. Trump’s whole trade war is not actually about trade (the DST, after all, applied to companies of any nationality, even Canadian). It’s about projecting imperial power, and further enriching the most profitable corporations (and the wealthiest individuals) in the world. It is daunting to confront that threat. But Mark Carney won a mandate from Canadians to do precisely that.

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New Data Confirms Canada-U.S. Trade is Balanced and Mutually Beneficial

Jim Stanford — Tue, 13 May 2025 21:03:31 +0000

The U.S, Census Bureau has released year-end 2024 data on America’s bilateral trade flows in goods and services. This data reconfirms that the U.S trade deficit is neither new, nor an “emergency” (as Trump has claimed in order to invoke special emergency powers to set tariffs). And it reconfirms that the U.S. trade relationship with Canada is uniquely balanced, and beneficial to the U.S.

Given Trump’s proclivity to simply invent statistics on trade and other economic indicators, it is important that Canadians have the actual data in hand to evaluate the outcome of this historic meeting.

Here are updated indicators regarding the U.S. bilateral trade relationship with Canada and other countries. They update material contained in the Centre for Future Work’s recent report, Who’s Subsidizing Whom? See that original report for more information on measuring and understanding trade imbalances, and analysis of ways in which Canada subsidizes the U.S. through several unusually favourable trade arrangements.

The overall U.S. trade deficit in goods and services increased in 2024, reaching $918 billion. That’s an increase of 17% from 2023, but still below the all-time high nominal deficit of $944 billion recorded in 2022. As a share of U.S. GDP, the deficit equaled 3.1% in 2024, well below the 3.6% recorded in 2022 – and significantly lower than deficits incurred in earlier years (deficits were over 5% of U.S. GDP in the mid-2000s).

However, America’s trade with Canada bucked that trend in 2024. U.S. imports from Canada declined by $6 billion, while U.S. exports to Canada were steady. The bilateral U.S. deficit in goods and services with Canada thus shrank by 12%, falling to $35.7 billion (U.S.). The U.S. trade deficit with Canada in 2022 ($57.6 billion U.S.) was inflated by high prices for oil (Canada’s largest export to the U.S.). In just two years, therefore, the bilateral deficit with Canada has declined by almost 40%.

Trump has regularly claimed that the bilateral U.S. trade deficit with Canada amounts to hundreds of billions of dollars. That claim is false – as is his claim that this deficit amounts to a “subsidy.”

Relative to overall U.S. spending, the U.S. trade deficit with Canada equaled 0.12% of U.S. GDP in 2024. That is barely half the relative size of the bilateral deficit in 2022 (0.22%).

It is interesting to compare the trajectory of bilateral trade in goods and services. The U.S. deficit in goods trade has shrunk significantly in the last two years (again, largely due to moderating oil prices). The U.S. surplus in services trade has grown steadily. The services surplus surplus ($35 billion in 2024) now offsets half of the goods deficit.

Trump generally excludes services industries from his attacks on other countries – for the obvious reason that the U.S. has a large surplus in services trade (almost $300 billion in 2024), undercutting his argument that the U.S. is “taken advantage of” by the rest of the world. This week, however, he has imposed tariffs on the film industry (an important tradeable service), and may consider other services-related trade actions.

Given Canada’s disproportionate purchases of U.S. services, there is considerable scope to consider application of counter measures affecting U.S. services businesses (such as data, business, technology, and financial services). That would enhance Canada’s leverage in future trade negotiations with the U.S.

The bilateral U.S. trade deficit with Canada in 2024 constituted less then 4% of the total U.S. trade deficit with the world. The bilateral deficit with Canada ranks tenth among U.S. trading partners, one seventh the size of the U.S. deficit with China, and much smaller than deficits with Mexico and other Asian countries.

Canada retained its crown as the largest export market for U.S. goods and services in 2024. Canada purchased $440 billion in imports from the U.S. in 2024, equal to 14% of America’s worldwide export sales. Again, the importance of the Canadian market to U.S. businesses gives Canada significant bargaining leverage in future trade discussions.

America’s small bilateral deficit with Canada pales further in significance to the enormous size of two-way trade between the two countries – which represents by far the largest bilateral trade flow between any two countries in the world. Canada purchased 92.5 cents of imports from the U.S., for every dollar of Canadian exports going to the U.S. The bilateral trade flow has become gradually more balanced in recent years.

America’s trade with Canada is significantly more balanced than its trade with other countries. Excluding Canada, the U.S. exports just 75.7 cents for every dollar it imports. Curtailing trade with Canada would thus have the self-defeating effect of making America’s overall trade even less balanced.

Trump’s erratic and inconsistent trade announcements have made it clear that his actions are not motivated by a genuine concern with trade deficits – any more than they are motivated by issues such as fentanyl, defense spending, or agricultural supply management. But this latest official data from the U.S. government’s own statistical agency confirms that the U.S. trade deficit is not large by historic standards. And America’s bilateral trade with Canada is uniquely balanced and beneficial.

For more explanation of the measurement, causes, and consequences of trade imbalances, and a catalogue of the ways in which Canada subsidizes the U.S. (through unusually favourable trade arrangements), please see our earlier report, Who’s Subsidizing Whom?

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Lessons from (Another) Crude Oil Price Collapse

Jim Stanford — Wed, 09 Apr 2025 19:19:10 +0000

This commentary draws on analysis of oil futures markets contained in the Centre for Future Work’s recent report, Counting the Costs: Impacts of the 2022 Oil Price Shock for Canadian Consumers and Workers, by Jim Stanford and Erin Weir. That report computes the costs of the 2022 oil price spike for Canadians: directly & indirectly it cost the average Canadian household $12,000 over 3 years.

At time of writing, crude oil prices are down $14/b (20%) in the last week. Apart from acute embarrassment for Danielle Smith (who called Trump’s tariffs last week a “big win for Alberta & Canada”), there’s an important lesson to be learned here about how crude oil futures markets work.

Prices for various specific crudes are set in relation to key benchmarks (mostly WTI & Brent) which are set on futures markets. Futures markets are financial markets. They don’t trade in oil; they trade in contracts which are promises to deliver oil at some time in the future.

There are far more futures contracts than there is physical oil produced in the world. On average, each barrel of physical oil produced is traded 14 times on futures markets. Normally, only about 1% of futures contracts are settled with delivery of physical oil.

Crude oil futures trading is worth $25 trillion (U.S.) per year—or $100b (U.S.) each trading day. Futures trading is driven by the same forces as other speculative financial markets: investors trying to predict where the price will go next, and thus make a trading profit.

Typical open contracts on the 2 big futures markets (10m contracts for 1000 barrels each) are equivalent to 100 days of global oil production at any moment. If traders sense a big change in prices one way or the other, 100 days of ‘supply’ can enter or leave at once.

This is why futures markets are so volatile, and always overreact to any shock in investor expectations. This has almost nothing to do with real supply and demand of oil, and almost everything to do with speculative psychology & herd dynamics.

We last saw this in 2022 when futures prices shot up $50US/bbl (65%) in weeks, sparked by FEARS about the Russian invasion of Ukraine. Those FEARS alone caused the spike in worldwide oil & related prices that were the biggest single initial cause of post-pandemic inflation.

But there was NEVER a ‘supply shock’ from that invasion: world oil supply kept growing throughout. And in Canada, of course, we kept setting new oil production records each year. It’s wrong to blame the 2022 price spike (and resulting inflation) on ‘supply and demand.’

Within 6 months prices came back down. But the damage was done: global inflation was set off and we suffered from it for the next 2+ yrs. A previous instance of futures market overreaction was the initial months of the pandemic, when prices fell too much (even below 0 for a time!).

There was no ‘supply & demand’ justification for the 2020 price collapse, any more than there was for the 2022 price spike. Global oil demand fell only 9% in 2020, and quickly recovered. That cannot explain such an extreme price collapse.

Some may think a sudden decline in oil prices is a good thing (for oil consumers, anyway). Not so. The collapse never lasts. It contributes to deflationary expectations during an economic crisis. And it sets the stage for unusually fast ‘inflation’ when prices simply recover.

In short, the speculative overreactions of oil futures markets, driven by fear & greed of gamblers, amplifies global financial instability. We’re seeing this again right now. We should question whether the price of such a central commodity should be set this way.

The “Counting the Costs” report recommends buffering these pointless, destabilizing shocks in futures markets: circuit breakers & limits on downstream price movements, greater regulation, and stronger royalties & taxes.

It’s challenging to imagine & implement a more rational, stable method to price oil. We’ve done it for other forms of energy (electricity prices in most of Canada are carefully regulated & quite stable). At any rate, we should stop pretending that this is either natural or efficient.

The post Lessons from (Another) Crude Oil Price Collapse appeared first on Centre for Future Work.

Most of our GDP Never Crosses a Border

Jim Stanford — Tue, 08 Apr 2025 23:09:53 +0000

U.S President Donald Trump’s unilateral tariffs have caused unprecedented disruption around the global economy, including Canada. He has claimed Canada is “not viable” as a country without exporting to the U.S., and hence we will have no choice but to accede to his demands. This is false. Canada is the 10^th largest economy in the world, with enormous human and natural resources. And most of what our economy produces—close to 80%—never crosses a national border. Rather, it is produced in Canada, by Canadians, for Canadians. In fact, the economy is not as ‘globalized’ as is often assumed. To be sure, Trump’s trade war will cause enormous disruption. But Canadians should feel confident in out country’s ability to survive, and ultimately thrive, even as we shift our orientation away from reliance on exports to the U.S. market.

In this commentary, originally published in the Toronto Star, Centre for Future Work Director Jim Stanford explains why Canada’s economy is not so global after all. For a video discussing similar themes, please see our most recent Debunkers Academy video, “Not so Global.”

Not So Global

Canada’s economy has been thrown into jeopardy by Donald Trump. Last week he announced a 25% tariff on car imports, after 25% tariffs on steel and aluminum two weeks earlier. We are already losing jobs and investments.

The next blow will be Wednesday, when he’s scheduled to impose “reciprocal tariffs” on all countries which collect tariffs on imports from the U.S.

Logically Canada should be spared from that, since almost all our U.S. purchases are already tariff-free—but that won’t stop Trump. Bizarrely, he says policies like our GST and digital services tax are grounds for retaliation—even though they apply evenly to all products, wherever they’re made. Alas, we’ve learned by now that Trump’s concocted grievances have no relation to reality.

Canadians rightly fear what comes next. After 35 years of free trade with America, all our export industries are very dependent on U.S. customers: minerals, forestry, energy, agriculture, manufacturing.

Trump claims Canada is “not viable as a country,” and says he’ll use “economic force” to ultimately annex us. So our alarm is justified.

However, while disruptions in U.S.-bound exports will cause major pain and a recession, it won’t spell the end of Canada’s economy. And we will certainly survive as a country. Indeed, in important ways, we are actually less reliant on foreign trade than commonly assumed.

Almost 80% of what we produce never crosses a border. It’s produced in Canada, by Canadians, for Canadians.

Sure, more than half our minerals and manufactures go to other countries, mostly the U.S. About a quarter of our agricultural output is exported, too.

But what about the rest of the economy? In other sectors, exports are much less important. In transportation and trade, exports (largely bought by tourists) make up 15% of output.

In business and private services (including banking, technology, and management services), it’s under 10%. Just 5% of utilities output is exported—mostly electricity, which we can always use at home.

In the broader public sector (including education and health care), just 2% is exported. And the booming construction industry exports virtually nothing.

These are huge segments of Canada’s economy. They employ the vast majority of Canadian workers—producing goods and services in Canada, for Canadians. These are industries Donald Trump can’t reach.

Counter-intuitively, exports have been shrinking in importance since the turn of the century. In the 1990s exports surged, after the initial Canada-U.S. free trade agreement (in 1989) and the subsequent NAFTA (in 1994). The gross value of exports (more on what this means below) reached a peak of 45% of Canadian GDP by 2000.

That export-reliance then began to unwind, however, for various reasons. Services make up a growing share of the economy, and most services are not traded internationally. Meanwhile, Canada’s manufacturing sector (highly export-dependent) contracted painfully in the 2000s, driven down by both trade pressures and a then-overvalued currency.

By 2010, the share of our economy represented by gross exports had fallen back to 30% of GDP, where it has languished since.

Moreover, that measure of gross exports is misleading. Almost one-third of the value of our exports consists of inputs, materials, and parts imported from other countries.

If we adjust for import content built into those exports, and instead measure the true domestic value-added of our exports, their relative importance shrinks further. Net (or value-added) exports constitute a bit more than 20% of GDP. The rest, almost 80%, is produced here. And stays here.

Expanding that huge non-traded portion of our economy will be essential to successfully rebuffing Trump. Boosting Canadian investments in infrastructure, housing, public services, and domestic trade will help.

Without doubt, our export industries are critical. We must do everything possible to protect them: finding new markets in other countries, new customers at home, and (hopefully) one day negotiating an end to this madness with our former ally.

But Trump’s claim Canada can’t survive without the U.S. is utterly false. We’re the tenth largest economy in the world. We have 40 million people: workers, consumers, citizens. We survived without depending on the U.S. in the past, and we will again.

Thinking global is important. But it isn’t everything. And if you get too obsessed with the global, you can miss what’s right here in front of us.

The post Most of our GDP Never Crosses a Border appeared first on Centre for Future Work.

Three New Videos: Trump’s Trade War; Wages, Profits & Prices; and Defending Living Standards

Jim Stanford — Wed, 26 Feb 2025 04:36:07 +0000

President Donald Trump’s repeated threats against Canada’s economy have caused great alarm. Meanwhile, home-grown right-wing populist forces have been advancing similar arguments here at home: claiming all of Canada’s problems arise from big government, big unions, or high taxes.

To support trade unions and other progressive movements responding to these challenges, the Centre for Future Work has prepared three new educational videos, all posted on our YouTube channel. They are free for sharing or screening at local or community meetings, or in classrooms:

Trump’s Trade War: Debunking his Lies, Tallying the Cost, Building a Fightback: 30-minute video disproving Trump’s false claims about the Canada-US trade balance, highlighting the risks to Canada of his tariffs, and identifying the major elements needed in a strong economic response by Canada. This video draws on material in our recent report, Who’s Subsidizing Whom?

Wages, Prices, and Profits: Identifying the True Threats to Our Standard of Living: 15-minute video reviewing the rise and fall of inflation after the COVID pandemic, showing it was record-high corporate profits (not wages, not deficits, and not taxes) that caused this inflation. It identifies three key industries (energy, housing, and food) where companies took advantage of post-pandemic disruptions to jack up the prices of necessities. This video is an essential antidote against those arguing that all of Canada’s problems are due to ‘Justinflation’ and the carbon tax.

Fighting to Protect Our Living Standards: This is a longer 30-minute presentation providing more detail on the true causes of inflation after the COVID pandemic, and the record-high corporate profits that resulted from that inflation. It lists five key economic measures required to protect and enhance Canadians’ living standards after the last challenging years. It updates previous research on inflation, profits, and real wages published on our website.

These videos help inoculate against arguments that all of Canada’s problems stem from taxes, deficits, or ‘Justinflation’.

The post Three New Videos: Trump’s Trade War; Wages, Profits & Prices; and Defending Living Standards appeared first on Centre for Future Work.

Canada needs a new National Policy

Jim Stanford — Mon, 03 Feb 2025 21:16:34 +0000

U.S. President Trump’s imposition of 25% tariffs on most imports from Canada will cause severe economic dislocation across Canada. Hopefully, a combination of negotiations backed by counter-measures announced by Canada will succeed in removing the tariffs in coming months. However, Trump’s actions have permanently damaged the credibility of any Canadian economic strategy based on continental free trade. In this commentary, originally published in the Toronto Star, Centre for Future Work Director Jim Stanford argues Canada needs to develop a new ‘National Policy’: one focused first and foremost on developing Canadian industries and capacities, rather than relying on trade with the U.S. as the primary economic engine.

In the face of Trump’s tariff threats, Canada can emerge stronger than ever

By Jim Stanford

Forty-one million Canadians experienced collective whiplash this week.

With trepidation, we awaited Donald Trump’s inauguration and his threatened day-one 25% tariff on imports from Canada. We heaved a national sigh of relief when his initial executive orders merely instructed U.S. officials to study bilateral trade issues, reporting back by April 1.

Hours later we were back in the abyss, after Trump casually repeated his 25% tariff pledge, now for February 1.

Is there any method to Trump’s to-and-fro madness? The optimistic view is that he’s creating leverage to bargain on other issues: border security, defense spending, our Digital Services Tax (hated by the tech billionaires hogging the front row at inauguration).

The pessimistic view is that Trump has bigger, nefarious ambitions: to go down in history as the first President in 65 years to enlarge the USA.

Either way, Canada is in big trouble.

Even in the optimistic scenario, and we avoid the tariff through concessions on other issues, we’ve learned where we stand. More importantly, global businesses have also learned where we stand. The long-standing sales pitch that Canada offers low-cost guaranteed access to U.S. markets is no longer credible.

Indeed, the flight of business investment following Trump’s threat (even if he doesn’t follow through) will likely be the worst consequence of this chaos. And that is probably his main goal: to show companies if they want to sell in America, they need to be in America.

If Trump’s strategy works, he will use it again. The idea of a rules-based trading system (whether in North America, or globally) is out the window. We are back to an era in which brute force rules. And Canada needs to get ready.

Bluntly, Canada once again confronts the fundamental challenge of preserving a viable economic and democratic entity that is more than the northern hinterland of an integrated continental behemoth.

The border is not an “artificial line,” as Trump claims. And it is not just a ‘friction’ interfering with efficient trade.

Modern trade theorists understand that borders can foster investment, development, and prosperity in places where they wouldn’t have occurred otherwise. Of course, that’s on top of the even more important dimensions of sovereignty that borders facilitate.

To preserve our viability as a going concern in the face of Trump’s aggression, Canada needs an emergency national response. This should include:

Emergency aid for export industries while they retool and reorient marketing to both other countries and domestic consumers.
Expanded access to Employment Insurance and other supports to help workers survive a disruption that will likely destroy one million direct jobs (and many more spillover impacts).
Redirect the main thrust of our economic development strategy away from trade, and toward doing things by Canadians for Canadians. There’s lots to do in that regard. An emergency plan to build affordable housing, infrastructure, renewable energy, and domestically-oriented manufacturing could more than replace the jobs destroyed by Trump.

The content and context for this emergency strategy are both reminiscent of the original National Policy, implemented by John A. MacDonald’s Conservative government in 1878. That plan included high tariffs on manufactured imports, tariff reductions on imports of raw materials and unfinished goods, and extensive financial and other assistance to develop Canadian industry.

A modern National Policy would likely use different tools (with more focus on innovation, capital investment, and sustainability). But the overarching goal – to develop a diversified, self-reliant national economy with critical mass to exist independently from the U.S. – is identical.

Moreover, the original National Policy followed a failed attempt by Alexander Mackenzie’s Liberals to negotiate free trade with the U.S. It was fundamentally motivated to resist America’s 19^th-Century expansion.

Fast forward to 2025, and it’s déjà vu all over again. Yes, we had a trade deal with the U.S., but it was useless (Trump unabashedly ignores it). And expansionism is clearly on the agenda again: Trump’s inauguration speech pledged to “expand our territory,” days after he proclaimed using “economic force” to absorb Canada.

The threat is existential, the coming debates will be fierce, and the burden of adjustment will be high. But if we stand up as we did at other defining moments in our history, Canada could emerge as a more independent country than we have recently imagined.

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