Carlo Dade

Published in The Hub

January 20, 2025

The principal goal of America First trade policy as articulated by leading proponents like Robert Lighthizer and Oren Cass is to move manufacturing jobs back to the U.S. They see trade deficits as the most important indicator of job losses that have devasted certain U.S. communities and in so doing exacted an enormous human toll. High tariffs are their policy tool to correct the imbalance, shift production back to the U.S. and restore American jobs.

Tariffs are, in other words, a means to a specific end rather than an end in and of themselves. The benefits of high tariffs beyond returning jobs to the U.S. are, at best, secondary considerations such as containing China.

Yet there is some nuance on trade deficits in America First trade policy. Lighthizer, the former U.S. trade representative, notes exceptions to the soundbite “no deficit is a good deficit” statements in mainstream media. This long quote from his book, No Trade is Free Trade, eloquently captures this thinking:

It is not my position that all trade deficits are harmful. Clearly, if a country runs a deficit one year and a surplus the next, no harm is done. The surplus will offset the deficit, and all is good. Likewise, for one country to run a bilateral trade deficit with a second country and a surplus with a third is fine. They offset each other. Indeed, all three countries could benefit by increasing efficiency and maximizing the allocation of resources among them. What concerns me, and motivated our work in the Trump administration, is running huge trade deficits with the entire world year after year for decades.

There are two exceptions to the understanding that bilateral deficits don’t matter. First, the content of trade can be important. For example, it is not in the interest of a large manufacturing economy such as the United States to ship basic materials overseas in exchange for manufactured goods. This makes the United States less developed and less rich, and it costs millions of high-paying manufacturing jobs. Historically, this is the colonial relationship. The United States should not be the miner and forester for other countries. We benefit from having value added in our country. Also, of course, we can’t be dependent on other countries for the manufacturing of products that are critical for national security.

The second exception to the principle that bilateral deficits don’t matter is that running up gigantic trade deficits with one’s geopolitical adversary is particularly stupid.

And this brings us to Canada. If the singular goal of an American First trade policy is to move value-added manufacturing jobs to the U.S. and strengthen the U.S. against its adversaries, any policy that prevents a country from doing this would be a betrayal of the America First movement and its commitment to the American people.

Canada’s trade surplus with the U.S. is an example of a Lighthizer beneficial trade deficit for the U.S. that he has missed—Canada’s energy trade surplus is an export of jobs to the U.S.

Unlike other countries with large trade surpluses with the U.S., Canada ships unrefined oil and gas to the U.S. to be processed by American workers in American refineries and facilities instead of in Canadian facilities by Canadian workers. This is exactly what America First trade policy articulates as its primary objective.

Think of each dollar of the Canadian trade deficit with the U.S. on energy as a contribution to an American job of adding value to Canadian crude oil. A critical point of America First trade theory is that the value of work is often as important, if not more, than economic efficiency gains. The goal of trade policy, therefore, is, first and foremost, to create and protect good, middle-class jobs that provide dignity and economic security for communities.

For reasons that are well known, Canada sells oil and gas to the U.S. at a discount, essentially a cost born by Canadian producers to get oil to Americans. A 2019 study commissioned by the American Petroleum Institute compared Canadian imports to U.S. domestic alternatives and found a net benefit of over $6 billion in total—with over $6 per barrel higher refining margins for U.S. refiners.

The reasons for this “discount” are irrelevant; what matters from an American First perspective is that not only does Canada export good, middle-class value-added jobs to the U.S., but it also makes a sacrifice to do so.

In every possible way, Canada is everything an America First trade policy desires to achieve. Yet, instead of a poster child; it is treated as a whipping boy.

To Canada and every country that the U.S. wants to help fulfill an America First trade agenda, a signal is being sent. Regardless of what you do, or the specifics of your case, you will be punished. In addition to harming Americans, tariffs on Canada are talking points for Chinese diplomats in Asia, Latin America, and Europe. A bullet in the other foot.

And it should be no surprise if these countries react accordingly. Pierre Poilievre, Conservative leader and likely next long-term prime minister of Canada, has zeroed in on the point that Canadian oil exports are subsidizing America.

If the goal is to support more middle-class jobs with dignity and meaning into the U.S., tariffs on the one country that is doing this is a self-inflicted wound and a betrayal of the promise that the America First movement has made to the American people.

Carlo Dade is Director of Trade and Trade Infrastructure at the Canada West Foundation. 

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