Assessing Trump’s Claims on Trade With Canada

President Donald Trump took to his social media platform, Truth Social, on Tuesday to announce additional steel and aluminum tariffs on Canada. In a 339-word post, the president made false claims about Canadian tariffs on American dairy exports, Canada’s defense spending, and incorrectly stated that the U.S. provides a $200 billion annual subsidy to Canada.

Based on Ontario, Canada, placing a 25% Tariff on “Electricity” coming into the United States, I have instructed my Secretary of Commerce to add an ADDITIONAL 25% Tariff, to 50%, on all STEEL and ALUMINUM COMING INTO THE UNITED STATES FROM CANADA, ONE OF THE HIGHEST TARIFFING NATIONS ANYWHERE IN THE WORLD. This will go into effect TOMORROW MORNING, March 12th. Also, Canada must immediately drop their Anti-American Farmer Tariff of 250% to 390% on various U.S. dairy products, which has long been considered outrageous. I will shortly be declaring a National Emergency on Electricity within the threatened area. This will allow the U.S to quickly do what has to be done to alleviate this abusive threat from Canada. If other egregious, long time Tariffs are not likewise dropped by Canada, I will substantially increase, on April 2nd, the Tariffs on Cars coming into the U.S. which will, essentially, permanently shut down the automobile manufacturing business in Canada. Those cars can easily be made in the USA! Also, Canada pays very little for National Security, relying on the United States for military protection. We are subsidizing Canada to the tune of more than 200 Billion Dollars a year. WHY??? This cannot continue. The only thing that makes sense is for Canada to become our cherished Fifty First State. This would make all Tariffs, and everything else, totally disappear. Canadians’ taxes will be very substantially reduced, they will be more secure, militarily and otherwise, than ever before, there would no longer be a Northern Border problem, and the greatest and most powerful nation in the World will be bigger, better and stronger than ever — And Canada will be a big part of that. The artificial line of separation drawn many years ago will finally disappear, and we will have the safest and most beautiful Nation anywhere in the World — And your brilliant anthem, “O Canada,” will continue to play, but now representing a GREAT and POWERFUL STATE within the greatest Nation that the World has ever seen!

Later that day, Commerce Secretary Howard Lutnick met with the premier of Ontario, Doug Ford, after Ford  announced a 25 percent surcharge on electricity exports to Michigan, Minnesota, and New York. Ford’s electricity tariffs were retaliatory, matching the 25 percent tariff rate Trump proposed on Canadian steel and aluminum imports to the U.S., leading to Trump’s threat of doubling those metals tariffs to 50 percent. Following his meeting with Lutnick, Ford announced he agreed to “suspend” the electricity surcharge, and White House spokesman Kush Desai later announced that American tariffs on Canadian electricity tariffs would be at a rate of 25 percent as initially planned, and not jump to 50 percent, effective midnight on Wednesday. 

Claim: Canada charges tariff rates of 250 to 390 percent on ‘various U.S. dairy products.’

This is not the first occasion Trump has made such claims. He was a fierce critic of Canada’s tariffs on American dairy products in his first term. “Canada charges the U.S. a 270%  tariff on Dairy Products!” he tweeted in June 2018. “They didn’t tell you that, did they? Not fair to our farmers!”

Canadian importers of U.S. dairy products are not paying tariffs of 250 percent or more. In fact, for most dairy products shipped from the U.S. to Canada, the effective tariff rate is zero percent—though additional trade restrictions come attached to that arrangement. 

Canada allows a certain amount of dairy products to be imported from the U.S. tariff-free, known as a tariff rate quota (TRQ). The quota is measured in total weight of the imported product. However, if U.S. dairy exports to Canada exceed the quota, Canada applies a costly tariff rate—more than 300 percent for some dairy product categories—for any dairy goods imported. However, the U.S. has never hit that threshold.

This isn’t a one-way street, either. The U.S. also has TRQs set for imports of Canadian dairy products. Before the quota is met, Canadian dairy imports face a tariff rate of zero percent. After that, certain products face tariff rates of 100 percent or more. 

Furthermore, those TRQ thresholds—which vary between dairy product categories—were negotiated in the U.S.-Mexico-Canada Agreement (USMA), signed by Trump in September 2018 along with Canadian Prime Minister Justin Trudeau and then-Mexican President Enrique Peña Nieto. Under the USCMA’s predecessor—the North American Free Trade Agreement (NAFTA), which the U.S., Canada, and Mexico signed in 1994—Canada had TRQs for dairy products exported from World Trade Organization (WTO) member-countries, which similarly allowed dairy shipments into Canada at a zero-tariff rate until the quota is met, after which high-tariff rates set in. USCMA didn’t discard those TRQs, but rather implemented additional TRQs to facilitate further trade with the U.S. “While WTO TRQs are to remain available to U.S. dairy product exporters,” the nonpartisan Congressional Research Service (CRS) noted in a report last updated November 2020, “the new TRQs under USMCA are to provide additional access to U.S. dairy products into Canada.”

How close has the amount of U.S. dairy products imported to Canada come to reaching its U.S.-specific quota? It depends on the type of dairy product, as different TRQ levels are applied to 14 categories of dairy goods. But in the last year, only three of those dairy categories—cheeses of all types, industrial cheeses, and butter and cream powders—filled at least half of the quota. The only category that came close to reaching the quota in 2024 was “cheese, all types.” Matt Herrick, executive vice president of the International Dairy Foods Association, explains that the “cheese, all types” TRQ comes close to being filled because some Canadian cheese processors have facilities in the U.S. too. “Canadian cheese processors will import their own product within their own company since they have operations on both sides of the border,” Herrick told The Dispatch Fact Check. For example, if a Canadian cheese processor is shipping an unfinished cheese product from the U.S. to one of its Canadian facilities to make the product ready for wholesale, it would be counted toward the TRQ. 

Does this mean that any U.S. dairy producer can export their product to Canada tariff-free as long as the quota has not been met? Not quite. Canada leaves aside a certain portion of those quotas for specific dairy goods. “For example, 85 percent of the milk and cream TRQs would be reserved for bulk shipments used for food processing,” a CRS report last updated in December 2019 noted. “The remaining portion would be for any use, including retail sales.” Canada ensures that a set amount is set aside within the quota by requiring importers to “apply for allocation” within the TRQ. Without obtaining that allocation from the Canadian government, importers of American dairy products would be forced to choose between paying the high-tariff rate or switching to a Canadian alternative. The Canadian government establishes “eligibility criteria” for which importers may bring goods under the TRQ. For example, applicants must prove they “manufactured, purchased or sold a certain minimum quantity of products” related to that TRQ category, and is only open to Canadian residents. If accepted, the Canadian government provides an amount of the dairy good, measured by weight, the importer is allowed to ship into the country under the TRQ. After an importer becomes an “allocation holder,” they must also acquire an “import permit” before shipping their product into the country. As the Canadian government states on its website, “Import permits for shipments of dairy products destined to the Canadian market are issued to allocation holders under Canada’s tariff rate quota (TRQ) for dairy products.” It added that those import permits are administered by the Canadian government agency, Global Affairs Canada. The agency charges a flat fee to obtain the permit, ranging between $10 to $26, depending on the total value of the imported good.  

Why does the Canadian government require that certain levels of in-quota imports be reserved for “bulk shipments for food processing”? Many Canadian food processing companies rely on American-made food ingredients. Having access to those ingredients with a zero percent tariff rate helps those companies keep expenses down. Requiring those companies to pay a tariff of up to 315.5 percent—the highest over-quota tariff rate on dairy goods, per the CRS—would hurt those companies’ bottom line. Instead of having those companies choose between paying the exorbitant tariff rate or switching to more costly alternatives, Canada ensures that their dairy imports fall within the quota, allowing access to American dairy products with no accompanying tariff. 

Claim: Canada relies on the U.S. for military protection.

“Canada pays very little for National Security,” Trump said in his social media post, “relying on the United States for military protection.”

It is true that Canada spends less on defense than the U.S., both in nominal dollars and as a share of GDP.  The U.S. does not directly subsidize Canada’s military, but Canadians do benefit from some American defense spending. “Canada currently benefits from U.S. spending per year on [the North American Aerospace Defense Command] NORAD defenses, and protection from the United States Air Force from foreign incursions,” a White House official told The Dispatch Fact Check. The official added, citing a Canadian Broadcasting Company article, “The U.S. covers ‘about 60 percent of the bill for NORAD.’” NORAD, the U.S. and Canada’s joint-defense command, does not have a publicly listed budget, although NORAD does receive some direct funding for equipment and other resources. For example, an 1985 U.S.-Canada treaty on NORAD stipulates that several high-tech radar systems are funded 60 percent by the U.S. and 40 percent by Canada. 

Funding for specific NORAD missions—which largely include monitoring the skies of North America for potential threats—comes from the U.S. and Canadian defense budgets. NORAD jets are property of either the U.S. or Canada, and its soldiers receive paychecks from their respective country’s government. For example, NORAD Commander Gregory Guillot concurrently leads the joint fighting force while serving in the U.S. Air Force. 

The White House official also noted that Canada in 2022 announced a $4.9 billion investment into NORAD spread out across six years, and a $38.6 billion investment across 20 years, for various “NORAD modernization projects.” No similar funding has been publicly announced from the U.S. However, in 2021, a joint statement from the U.S. and Canada committed to enhancing “NORAD modernization” and stated that both the U.S. Defense Department and Canada’s Department of National Defence “intend to move forward deliberately with coordinated investments.”

Claim: U.S. provides $200 billion in subsidies to Canada.

The U.S. is not “subsidizing Canada to the tune of more than 200 Billion Dollars a year,” as Trump claimed. When asked for the source of that figure, a White House official told The Dispatch Fact Check it included 1) the $70.6 billion U.S. trade deficit with Canada on all commodities in 2024 and 2) U.S. “outsized spending” on NORAD of which Canada also benefits. 

A negative trade balance is not a subsidy, and there are no public figures available on total U.S. “outsized spending” on NORAD. 

“A trade balance is not a complicated concept,” Dispatch contributor Scott Lincicome wrote on Wednesday. “It’s simply the difference between what a nation exports—both goods and services—and what it imports.” He added, “If the former is greater than the latter, you have a surplus. If the latter is greater than the former, you have a deficit.”

That difference does not represent a value to be paid from one country or taxpayer to another. “An international current account deficit is not comparable to a private debt,” P.J. O’Rourke wrote in his 2007 book on Adam Smith’s Wealth of Nations. “[Former Chinese President] Hu Jintao is not going to show up at my door threatening to repossess my DVD player because he has a fifty-dollar bill that I owe on.”

Trade deficits do not represent subsidies or expenses to be paid later. Lincocome explained further that Trump’s attempt to liken trade deficit to debt “ignores that dollars we send abroad to foreigners buy us real goods and services that we value (or else we wouldn’t buy them), and that … those same dollars eventually return to the United States as investment in the U.S. private or public sector (by mostly unrelated people).”

As for outsized NORAD spending charged to the U.S. that in part benefits Canada, as previously discussed, most costs associated with NORAD come directly from the country’s respective defense budget. There are no publicly available estimates for the “outsized spending” figure, it’s unclear why Trump estimated $200 billion between the trade deficit with Canada and NORAD spending. 

If you have a claim you would like to see us fact check, please send us an email at factcheck@thedispatch.com. If you would like to suggest a correction to this piece or any other Dispatch article, please email corrections@thedispatch.com.