Trade Tariffs and Cross-Border Shipping – Part Four

In this installment of our 5-part series on trade tariffs, we will be talking about the effect of tariffs between the United States and Canada.

If we were to tell you that trade between these two countries is nearly identical and equal, would you believe us? It is often reported that trade between The United States and our cross-border friends in Canada is not balanced, with the United States holding a huge advantage or trade surplus. But when we breakdown the numbers, and realize that both countries need each other, you'll quickly discover the truth about cross border shipping with Canada, and that it is incredibly well balanced. 

Both Canada and the US have maintained a solid and efficient trade relationship for decades. As a matter of fact, it is drastically different than the relationship between the US and Mexico, which has been erratic, to say the least. As a result of this stable partnership between the US and our cousins to the North, tariffs on imported and exported goods between these two countries typically remain consistent. Thus, tariffs do not usually have a huge impact on the supply chain between the two as it never really fluctuates.

However, that was not the case last year.

In this series, we've discussed how trade tariffs impact various aspects of cross border shipping. We have even covered how inconsistent tariff rates with Mexico impacts the shipping industry, retailers, and manufacturers in the US.

In this 4th installment, we are outlining the facts about trade between Canada and the United States! 

The Facts About Trade Between the US and Canada 

The trade relationship between the US and Canada is solid. In 2018, the two countries swapped goods in the amount of nearly $715 billion. For the United States, exports to Canada equaled $360 billion dollars, while the country imported $353 billion dollars. When you add it up, this is a trade surplus of only $7 billion. In the North American trade world, that’s what we would call exceptionally well-balanced.  

But here's the catch, these numbers are what the United States reports, not Canada.

According to our friends up North, they maintain a $103 billion trade surplus with the United States. A lot of these trade numbers and figures are inconsistent. This happens because of the way our countries process freight. More often than not, freight shipped into either country is processed at regional terminals. Unfortunately, this has resulted in items seemingly "slipping through the cracks", as they say.

Nonetheless, the relationship between Canada and the United States is much more relaxed and consistent than it is with Mexico. 

Here are a few facts about imports and exports between our two countries...

Canada is the largest United States exporter of goods, with nearly $300 billion worth of freight crossing the border in 2018. Vehicles made in the USA are the leading source, with $52 billion in estimated value. Next up is machinery ($45 billion), electrical ($26 billion), and agriculture ($24 billion).  

On the import scale, Canada is the 3rd largest supplier of imported goods to the US. We receive mineral fuels ($84 billion worth), vehicles made in Canada ($53 billion), and plastics ($12 billion) among other commodities from Canada. 

The Current State of Tariffs Between the United States and Canada

2018 was a bad year with tariffs all around.

In May of 2018, The United States of America imposed a 25% tariff on the import of Canadian steel and 10% on aluminum. In response, Canada charged tariffs on the importing of United States food commodities and cold supply chain imported products. However, these tariffs on metals have been quickly being resolved.

While there are many opinions on the reason why this happened, in the end, cooler heads prevailed. With the creation of new trade agreements, a lot of these issues finally face revisions.

Although this treaty has not been ratified yet, it opens the door of opportunity. This treaty could signal the opportunity for US-based agriculture and food commodity manufacturers to increase sales into Canada. This is done by virtually eliminating import tariffs on many agricultural products.  

The trade relationship between the US and Canada has historically been a positive one. Even with everything that happened between our two countries last year, we will undoubtedly bounce back quickly. So, while the current state of this relationship appears stressed, we have high hopes that the future looks bright for trade between the US and Canada!