Have you heard the one…..

….about the country that brought a knife to a gunfight?

There was muted joy in Canada on Jan 20 when the newly inaugurated US prez did not impose tariffs on Canadian imports. There have been mutterings that might yet happen on Feb 1, but who knows? Our PM has been quoted as saying the US Prez is a great negotiator, and so likes to keep his negotiating partners off balance. I get that it is thought wise to flatter the guy now that he’s in office, but I really doubt that even DJT knows what he will or will not do regarding tariffs on Canadian goods come Feb 1 or any other date. Planning ahead is not his thing.

They might indeed be imposed, they might be across the board, they might be at 25% or…..not. No way to know.

That said, Trudeau’s ‘Team Canada’ approach to any tariffs that are imposed by the US appears to be centred on tariff retaliation. Canadian leaders say they are drawing up lists of goods that are imported from the US to impose tariffs on. Go, Team. Alberta’s Premier Danielle Smith has drawn the PM’s ire for not going along with this, at least so far as oil exports to the US go, and there is reason to think that an export tax or ban on oil to the US is a bad idea, but I will leave that for another possible post.

This post is going to take a look at the broad data relevant to an out-and-out tit-for-tat tariff war between Canada and the US. The phrase ‘dollar for dollar’ tariffs gets thrown around and I have no idea what that means. Which dollar, to start with.

Again, leave that aside, and ask a very basic macro-sized question: who is likely to get hurt more by any tit-for-tatting: Canadian citizens or US citizens? (You can bet that none of DJT or JT or Danielle Smith or Doug Ford is going to get hurt. The soldiers in this war are you and me, count on it.)

Well, the details matter, for sure. Such a war will undoubtedly benefit some Canadians. If you are a Canada-based producer who has to compete with goods imported from the US, then any tariffs imposed by our leaders on those imports will increase demand for your products. That’s just one example, again – the details will matter.

That being said, here are two answers to a very broad question.

Which country depends more on imports from the other: Canada  or the US? The US economy is clearly much bigger – the usual factor of 10 or more. So, how to answer this broad question? The numbers below come from a variety of sources and are at best approximate. I can find no single reliable source that tracks every statistic I need, so I went to Stats Can and other sites to get data, and then used an average exchange rate to convert things to a common currency where necessary. As I hope you will see, the differentials are so wide that no amount of approximation error will change the basic message.

The numbers are annual amounts, some of which are from ’23 and some from ’24, depending on what I could find. Again, the differences between those two years are minimal and nothing depends on them.

US goods imports from Canada: $US377B

US exports of goods to Canada: $US322B = (approx) 1.37 x 322B = $Cdn441B

(Note that as has been written often in recent weeks, the US runs what is known as a small trade ‘deficit’ with Canada, which is just a term for the fact that it buys more from us than it sells to us. True, but irrelevant, I assert.)

Total Cdn imports from all countries: $Cdn759B

Total US imports from all countries: $US3.8T

This means that 441/759 = 58% of the value of all goods imported into Canada in recent years has been in goods imported from the US.

On the other hand, 377/3,800 = under 10% of the value of all goods imported into the US in recent years has been in goods imported from Canada.

To put it bluntly, if it comes to a ‘trade war’ of tariffs and retaliatory tariffs, Canada is going to be the proverbial guy who brought a knife to a gunfight. The US imports mostly from countries other than Canada, while Canada imports from mostly the US.

There is another way to carve this up to answer the basic question: for which country are total imports from the other country a bigger part of the economy? That is, which country is more reliant on imports from the other country for the things its citizens buy?

This comes down to comparing the value of imports from the other country divided by the importing country’s total GDP.

US GDP = $US27.7T, while total imports from Canada were $US377B

Canada GDP = $US2.1T (note the rule of 10), while imports from the US were $US322B.

So, US imports from Canada comprised 377/27,700 = 1.36% of the US’s GDP

Canadian imports from the US comprised 322/2,100 = 15.3% of Canada’s GDP

Knife to a gunfight, no matter how you slice it.

I have no idea what dollar for dollar tariffs could mean, as I said, but let’s just suppose it means ‘percentage point for percentage point’ and the US does end up imposing a 25% tariff on all imports from Canada, and Team Canada responds exactly in kind. US consumers will see the prices of about 1.4% of the things they buy go up, maybe by 25%, maybe less. Canadian consumers will see the prices of 15% of the thing they buy go up, maybe by 25%, maybe less.

Knife, meet gun.

I hasten to add there are other ways to look at this. For example, what percentage of Canadian domestic production goes to the US? That will tell us something about how much the US tariffs will hurt Canadian companies, but I am not going out on a limb if I say that that will be a bigger number than the percentage of domestic US producers who sell things to Canada.

It will still be knife vs gun. It has been said by many before me, but if Canada had diversified its international trading partners eight years ago, this asymmetry in import-reliance would be less. Too late, now.