Source : INDIA TODAY NEWS
US President Donald Trump has said the United States does not need Canada, but the trade relationship between the two countries remains deeply tied to American demand for Canadian oil, aluminium, potash, auto parts and electricity. Roughly 4 million barrels of Canadian crude oil move south every day, helping fuel cars, trucks and aircraft and supplying US industry.
The gap between Trump’s claim and the reality of cross-border trade has come into sharper focus as his administration widens tariffs on Canadian goods. Canada is the United States’ second-largest trading partner after Mexico, and the two countries exchanged about USD 872 billion in goods and services last year, with energy at the centre of that relationship.
advertisement
Trump repeated his position this week, posting, “WE DON’T NEED CANADA, THEY NEED US!” But he has also imposed a 50% tariff on Canadian aluminium while acknowledging the US depends heavily on it. “This country desperately needs aluminum,” Trump said. “We don’t have it. We get it all from Canada for the most part, and we need it badly.” Daniel Beland, a political science professor at McGill University, called Trump’s claim “absolutely false”, pointing to American reliance on Canadian oil and natural gas and to highly integrated industries such as automobiles.
Canadian crude imports account for nearly 20% of total US petroleum consumption, according to the US Energy Information Administration, which is part of the Department of Energy. Much of that crude goes to Midwest refineries designed to process Canada’s heavy oil into petrol, diesel and jet fuel. Energy also explains much of the US trade deficit with Canada, which Trump often cites as proof of an unfair relationship. The White House said this week that Canada had taken roughly USD 50 billion a year from the US over the past decade, but much of that gap reflects American purchases of Canadian energy. Canada’s heavy crude also usually trades at a discount to US benchmark oil, according to the Energy Information Administration. Energy accounted for more than last year’s USD 48.3 billion goods deficit, and without energy the US would have run a trade surplus.
After trade talks collapsed last Friday, the US imposed 50% tariffs on about USD 20 billion worth of Canadian goods. The measures apply to only about 5% of Canadian exports to the US and do not cover energy. For now, using oil in the trade dispute remains a remote possibility. Alberta Premier Danielle Smith opposes restricting energy exports, saying such a move would hurt her province. Former Alberta premier Jason Kenney, however, said Canada should not rule out export taxes on oil, fuel or potash if Trump escalates further. Such retaliation, he said, “would affect Republicans who drive F-150s and lay fertiliser on their farm fields”. He added, “They should be mindful that if they really want to escalate, it will not end well for the American economy two months before midterm elections.”
Ontario Premier Doug Ford also pointed to Canadian commodities as leverage, accusing Trump of “putting out fake news” about the US not needing Canada. Ford described potash used by American farmers as “one of the most powerful tools we have” and said Washington would have to turn to suppliers such as Russia if Canada redirected shipments. Kenney stopped short of directly backing an export tax, and Beland said such a move would probably be “a very divisive issue politically in provinces like Alberta and Saskatchewan”. That highlights the limits of Canada’s leverage, since steps that hurt US industries could also damage Canadian producers and test political unity at home.
Canada has long been the main foreign source of aluminium for the US, with hydroelectric power giving it an advantage in smelting, which uses large amounts of electricity. Prime Minister Mark Carney told a business audience in New York in May that Canadian aluminium exports to the US are “the energy equivalent of 10 Hoover dams”. American farmers are even more dependent on Canada for potash, a fertiliser used for crops such as corn and soybeans. More than 80% of US potash imports come from Canada. Even Trump’s ambassador has challenged the idea that the US needs nothing from its neighbour. “America has a tremendous amount of things where we have a need,” Ambassador Pete Hoekstra said in June. Referring to Canadian fertiliser supplies, he added: “We need potash.”
The same interdependence is visible in the auto sector. According to the Canadian government, parts in the integrated North American auto industry can cross the border up to six times before final assembly. Trump said on Monday that his administration would impose 50% tariffs on Canadian cars, trucks and auto parts from January 1, 2027, after the November midterm elections. That means tariffs aimed at Canada could also raise costs in US manufacturing centres such as Michigan and Ohio. Taxing Canadian aluminium can raise costs for an American carmaker, and taxing Canadian parts can increase the cost of assembling a vehicle in the US. Canada is also an important electricity supplier. The Canada Energy Regulator said Canada accounted for 85% of US electricity imports in 2023, while Carney has said the country needs to double the capacity of its electricity grid by 2050 through large hydroelectric and nuclear projects. He said Canada could help the US “meet exploding demand to power AI”.
Trump’s remarks and the tariffs announced by his administration have again drawn attention to how closely the US economy remains linked to Canadian supplies of energy, metals, fertiliser, vehicle parts and electricity, even as both sides weigh how far the trade dispute could go.
With PTI Inputs
– Ends
SOURCE :- TIMES OF INDIA
