Excluding energy, Canada has a trade deficit with the United States. That’s the top message Ottawa sent to Washington in a filing in response to U.S. Trade Representative’s (USTR) request for comments as it assesses the “unfair” practices of its trading partners.

U.S. President Donald Trump has decried the trade surplus Canada enjoys against the U.S., calling it “essentially a subsidy”. Ottawa’s eight-page filing, however, noted that the surplus is primarily due to American refiners’ preference for affordable, reliable Canadian fuels that Americans count on to power the U.S. economy.

Excluding energy, the U.S. has enjoyed a merchandise trade surplus with Canada since 2007, which stood at $34.3 billion in 2024. Meanwhile, U.S.’s services surplus with Canada stood at $34.9 billion.

The filing sets the stage for a Canadian response and also tries to get ahead of several sticky points that will likely come up in any future negotiations on the Canada-U.S.-Mexico Agreement (CUSMA).

Here are some of the key themes and numbers—and grievances—that emerged from Canada’s filing:

We are your biggest customer: Canada buys more U.S. goods than China, Japan,  and Germany combined. Canada was the top export destination for 32 U.S. states in 2024, and buys many high-valued finished manufactured products such as equipment, vehicles, agricultural products and a wide variety of consumer goods. Some eight million U.S. jobs are tied to trade with Canada.

Canada shares American concerns over unfair trade practices: Ottawa imposed 100% tariffs on Chinese EVs and 25% on Chinese steel and aluminum products, in addition to other tariffs on Chinese critical minerals, renewable equipment etc.—all these align Canada to several U.S. actions to limit Chinese goods. Ottawa is also monitoring steel import supply chains, and amended its Investment Canada Act last year to address national—and continental—security risks.

Crucially, “Canada is considering additional measures to address risks to Canadian and North American economic security and supply chains,” to crack down on critical mineral being sourced from “jurisdiction of concern.”
Equally critical, Canada emphasized that it’s neither a transshipment risk nor a backdoor to the U.S. market for trade practices that could harm the continent’s collective economic security.

There should be no beef over dairy trade: U.S. dairy exports to Canada has soared to $1.14 billion from $728 million when CUSMA came into force. The U.S. enjoys a dairy trade surplus with Canada, which has grown 45% since 2020. Trump had said Canada’s 200% tariffs on U.S. dairy products is a “trade irritant,” but omitted that the tariffs only apply if the agreed tariff-rate quotas on U.S. dairy imports under CUSMA are reached or exceeded. U.S. negotiators were interested in retail access to dairy during the original CUSMA negotiations, which may pop up again during the renegotiations process. But the quota system is what’s seen as a trade irritant, which may require some accommodation from Canada.

Canadian digital services tax do not discriminate: The tax does not solely target U.S. firms, but applies equally to Canadian entities. Last fall, Canada engaged in a substantive and constructive dialogue with USTR counterparts as part of the USMCA dispute settlement consultation process. The DST, however, has been a persistent irritant that corporations and the U.S. government have raised, and this letter is unlikely to wish that away.

Setting the record straight on VAT: A bone of contention that President Trump raised was Canada’s GST—a consumption tax, equating it to a tariff. The Canadian brief sets the record straight—that it’s not a tariff and does not unduly harm, U.S. firms.

Let’s launch a trilateral Financial Regulatory Forum: The first Trump administration had proposed the creation of a Canada-Mexico-U.S. Financial Regulatory Forum to boost dialogue on financial sector developments and regulations. The forum never got off the ground, but Canada said it welcomes the opportunity to establish the initiative.

We need each other in steel and aluminum: Canada bought 37% of U.S. steel exports , or $5.5 billion, and has historically been a top export destination for U.S. steel for the past fifty years. Meanwhile, U.S. manufacturers rely on Canadian steel are vertically integrated with companies north of the border to maintain their competitiveness.

The U.S. industry is also highly reliant on scrap aluminum – and particularly on primary scrap aluminum of which Canada is the primary source.

Canada has taken steps to protect both industries from unfair trade practices by imposing tariffs on Chinese imports and strengthening its trade remedies regime to address unfair trade and circumvention.

The overall message was Ottawa remains committed to promoting fair trade and countering unfair and non-reciprocal trade practices by other countries to facilitate North American competitiveness and security.

“However, Canada’s ability to take action to combat unfair trade practices from other countries is constrained when faced with unjust and unwarranted trade measures from the United States,” The briefing noted.

Ottawa said it aims to leverage its G7 presidency this year and stress on the issue of unfair trade practices with like-minded countries. Closer to home in Charlevoix, G7 Foreign Ministers came out with a statement calling out China’s “non-market policies and practices that are leading to harmful overcapacity and market distortions”, but watered down language on the human rights situation relative to prior G7 statements.

The G7 will be an important forum this year on issues of trade, economic security and energy, with Prime Minister Mark Carney inviting President Zelenskyy, with whom President Trump is signing a ceasefire deal with that could lead to Ukraine signing away some of its critical minerals. It’s a useful reminder that Canada is one of many countries that is at the receiving end of the U.S.’s economic statecraft measures.

Read Ottawa’s full response here.

With contributions from Shaz Merwat and Varun Srivatsan.

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