Trade Breakdown: Goods vs. Services
The U.S.-Canada trade relationship is dominated by goods, but services trade is also significant - and the U.S. runs a surplus there.
| Category | Total | U.S. Exports | U.S. Imports | Balance |
|---|---|---|---|---|
| Goods | $761.8B | $349.9B | $411.9B | -$62.0B deficit |
| Services | $147.3B | $90.3B | $57.0B | +$33.2B surplus |
| Total | $909.1B | $440.2B | $468.9B | -$28.8B deficit |
The Deficit Context
While the U.S. runs an overall trade deficit with Canada, this is heavily driven by energy imports (oil and electricity) that the U.S. needs. The services surplus reflects strong U.S. exports in financial services, technology, and professional services.
Energy Integration: The Critical Dependency
Energy is the backbone of U.S.-Canada trade interdependence. Canada is by far the largest source of U.S. oil imports, and cross-border electricity trade powers millions of homes.
Crude Oil Imports
Source: EIA (July 2024 record)
Electricity Trade (2024)
Note: 2024 electricity exports were the lowest since 2004. CER
Source: Canada Energy Regulator - 2024 Energy Trade Overview
USMCA Joint Review Countdown
The first USMCA joint review is due by July 1, 2026 (Art. 34.7). All three parties must confirm extension for another 16 years—or the agreement enters annual review until 2036 expiration.
Key Sectors at Risk
These are the sectors most exposed to U.S.-Canada trade disruption:
Automotive
Deeply integrated supply chains. Parts cross border multiple times before final assembly.
Energy
Oil, natural gas, electricity. U.S. refineries built for Canadian heavy crude.
Dairy
Supply management system is persistent U.S. grievance. USMCA expanded access.
Lumber
Ongoing softwood lumber dispute. Tariffs already in place.
Digital Services
Data localization, digital trade rules under review.
Critical Minerals
Canada is key supplier for EV batteries, defense applications.
Tariff Impact Scenarios
What would different tariff levels mean for the U.S.-Canada relationship? These are conceptual scenarios based on trade war patterns:
Targeted tariffs on specific goods. Signals displeasure, creates negotiating leverage. Manageable impact.
Broad sectoral tariffs. Significant supply chain disruption. Auto sector severely impacted. Retaliation likely.
Effectively prohibitive for many goods. Full-scale trade war. Major recession risk for both economies.
The Mutual Destruction Problem
High tariffs hurt both sides. U.S. refineries need Canadian heavy crude. Canadian manufacturers need U.S. parts. Auto plants would halt. Energy prices would spike. This mutual vulnerability is why trade wars typically end in negotiated settlements.
Canada's Retaliation Options
If the U.S. imposes significant tariffs, Canada has several tools available:
Retaliatory Tariffs
Dollar-for-dollar tariffs on U.S. goods, targeting politically sensitive exports (bourbon, agricultural products, steel).
Energy Export Restrictions
Limit oil, electricity exports. Politically difficult but would cause immediate U.S. pain, especially in Midwest refineries.
Trade Diversification
Accelerate trade agreements with EU, UK, Asia-Pacific. Reduce long-term U.S. dependence.
WTO/USMCA Disputes
File formal complaints. Slow process but establishes legal record and international legitimacy.
Buy Canadian Policies
Government procurement preferences for Canadian goods. Symbolic but economically limited.
Canada Hub Overview
Legal pathways, constitutional barriers
Full Timeline + Polling
All quotes, trade actions, Canadian opinion
Greenland Analysis
The other annexation target
Tariffs Triggering Contract Disputes?
25% tariffs are causing force majeure claims, price adjustment disputes, and breach allegations. Get legal help navigating your contracts.