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Canadians

Canada's Economic Destiny: Understanding the Gravity of US Trade Dependence

Strategic Insights

— 1 min read

Canada's trade relationship with the United States is a complex and centuries-old phenomenon that has shaped the country's economic prosperity. The United States is Canada's largest trading partner, with 77% of Canadian exports going to America, compared to 2-3% to the UK and 2-3% to China. This high level of dependence on US trade is not a recent development, but rather a persistent phenomenon that has been driven by geography, cultural ties, and economic gravity.

Key Takeaways:

  • The "gravity model" in economics suggests that trade between neighboring countries is more likely due to factors such as shipping costs, cultural distance, and supply chain integration.
  • Canada's trade dependence on the US is primarily due to its geographical proximity and cultural ties, which have created a rich and efficient production system.
  • The country's economic stagnation since 2015 can be attributed to poor domestic policy, not foreign malfeasance.
  • Canada's tax treatment of entrepreneurs is punitive compared to the US, hindering innovation and growth.
  • Self-inflicted economic harms, such as the nationwide housing crisis and restrictive immigration policies, must be addressed.
  • Renormalization of trade with the US, removal of barriers to trade, and expansion of transport links are essential for economic prosperity.

Statistics:

  • 77% of Canadian exports go to the US (since 1870)
  • 2-3% of Canadian exports go to the UK (since 1870)
  • 2-3% of Canadian exports go to China (since 1870)
  • 19% GDP per capita growth in the US since 2015, compared to 1% in Canada
  • Canada's trade deficit with the US has persisted for over 150 years
  • Over 50% of international trade is in intermediate goods used to make something else in the recipient country

Sources:

  • John A. Macdonald, John Diefenbaker, and Pierre Trudeau's external affairs minister
  • Kevin Bryan, Innovation Economist at the University of Toronto's Rotman School of Management
  • The Canadian government
  • Various economic studies and models, including the "gravity model"

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