Trump claims the trade deficit with Canada is a $200B subsidy. Experts disagree

U.S. President Donald Trump's claim that his country subsidizes Canada with hundreds of billions of dollars every year has become a key plank in his argument for annexing the country. But do his numbers add up?

His argument hinges on a belief that the deficit in trade between the two countries has left the U.S. footing the bill for Canada's economic growth.

The amount of "subsidy" Trump claims the U.S. provides Canada has varied over time. In December, he said it was $100 billion US. And he claimed it was $200 billion as recently as Thursday.

"We can't do that anymore," he told an audience at the World Economic Forum last month as he put the deficit at $250 billion. "You can always become a state, and if you are a state we won't have a deficit. We won't have to tariff you."

Experts say that while the U.S. has a trade deficit with Canada — i.e. we export more to them than they export to us — that relationship serves the U.S. economy well and should not be viewed as a subsidy.

"I think that in Trump's mind, he sees trade as a zero-sum game," Moshe Lander, an economics professor at Concordia University, told CBC News. "He's just hearing the word deficit. And that's the end of his math calculation."

Lander says that if Canada hypothetically "sold its oil for $100 but the U.S. paid $125, that would be a subsidy."

That price difference would then be recorded as a gift in Canada's record of financial transactions "without any goods and services provided in return," which Lander says it isn't.

University of Toronto economist Joseph Steinberg explains that when a country has a trade deficit, it has more capital flowing in than it does flowing out — which can strengthen its economy.

"The U.S.'s aggregate trade deficit is really not a function of trade policy," Steinberg said. "It's mostly a function of [a] relatively low desire to save within the United States, but perhaps more importantly, a relatively strong desire throughout the world to invest in the United States."

He said the U.S. is the top destination for foreign direct investment, which is a net benefit to that country.

"The general principle is that a trade imbalance is not a form of subsidy," he said.

Steinberg says the U.S. imports more aluminum from Canada than Canada imports from the U.S. because milling aluminum is cheaper here, largely because of the abundance of inexpensive electricity north of the border, particularly in Quebec.

"It's better for us to produce it because we're better at it," Steinberg said. "And it's great for them, too, because they get to consume it more cheaply than they otherwise would."