Canada Holds Lots Of Cards When It Comes To Negotiating Trade With The U.S.

President Trump is famous for telling his adversaries that they “ don’t have any  cards to play”. Yet when it comes to trade relations with Canada, he has consistently underestimated the “cards” Canadians have in their hand. At the moment, there are no direct and formal negotiations between Canada and the US Administration and none are specifically slated. However, the Canada-US-Mexico Agreement  (CUSMA) is up for re-negotiations in 2026.

 Canada has generated regularly run  merchandise trade surpluses   with its southern neighbour, while the US earned surpluses in cross border services.

Canadian  Merchandise Trade Surplus with US ( Cdn$)

Looking under the hood, the trade surpluses are in essential commodities and finished products that the US relies upon, quite heavily in such areas as energy,metals, minerals and forest products. 

While the US is a net exporter of oil and natural gas, its domestic distribution is largely delivered by pipelines running north and south. Hence, Canadian  crude oil is especially vital to refineries in the Midwest and Gulf Coastal states. Canada accounts for 60% of all US crude imports and 22% of total crude oil consumed in the US .  To the extent that Canadian oil sells at a discount to the international price, the US reliances on Canada as a stable source of oil for nearly a quarter of its needs, raises the issue of who really possesses high cards.

Canada is known to supply critical minerals, such as lithium, nickel,cobalt and graphite, the so-called “ battery metals” In addition, Canada mines strategic minerals for use in the defense industries, such as tungsten,uranium and several “rare earths”. Finally, the US relies on Canada for  80% of potash as a main fertilizer in its agricultural heartland.

Canadians seem in no rush to jump into negotiations with the US on the overall free trade agreement. Granted there are specific trade barriers that harm Canadian exports, including aluminium, steel and auto equipment. But there is  the bigger picture to consider in which Canada is a leading supplier of commodities so badly needed in the US.