Canada-U.S. Trade in 2025: A Complex Balance of Goods, Oil, and Tariffs

An in-depth look at the evolving Canada-U.S. trade relationship in 2025, highlighting non-oil trade imbalances, discounted Canadian oil exports, and the long-term risks posed by persistent U.S. tariffs.

#CanadaUSTrade #GlobalEconomy #Tariffs #EnergyPolicy #TradeDeficit #NorthAmerica #EconomicPolicy #Manufacturing #OilExports #BilateralRelations #SupplyChains #TradeTensions

 


 In the first half of 2025, Canada imported more goods from the United States than the U.S. did from Canada—when oil is excluded.

While total U.S. imports from Canada reached approximately $157 billion for the first half of 2025, a significant portion—between $41 and $45 billion—comprised oil and energy products.

In contrast, Canada’s purchases of non-oil goods from the U.S., including high-value manufactured items, machinery, and vehicles, exceeded this figure, contributing to a trade deficit on Canada’s side in non-energy sectors. In the first half of 2025, Canada’s total imports from the United States amounted to approximately $216 billion, according to customs-basis data.

This means Canada’s purchases of non-oil goods from the U.S… including machinery, vehicles, and manufactured items (approximately $216 billion )...exceeded the U.S.’s non-oil imports from Canada, which were around $112 to $116 billion

 However, the oil trade presents a nuanced picture. Canada exports large volumes of heavy crude oil to the U.S., but this oil is sold at a steep discount compared to global benchmarks due to its lower quality and the added costs of refining and transportation. The U.S. refines much of this crude and resells it domestically and abroad, capturing substantial profit margins on the refined petroleum products. This dynamic highlights the asymmetry in value creation: while Canada supplies raw materials, the U.S. profits from downstream processing and resale.

When oil is included, Canada’s exports to the U.S. appear larger in volume, but the discounted nature of these exports means the U.S. still gains more in terms of refined product value. This underscores the complexity of the bilateral trade relationship, where volume and value diverge significantly depending on the sector.

Canada’s role as a top purchaser of U.S. goods and services remained strong throughout 2024, reinforcing its position as a critical trade partner. Canada imported more U.S. goods than any other country, including vehicles, machinery, energy products, and over $30 billion in agricultural goods.

Yet, this interdependence faces growing strain from persistent U.S. tariffs.

Economically, continued tariffs are pushing Canada to diversify its trade relationships, seeking new partners in Asia, Europe, and beyond. These measures could disrupt deeply integrated supply chains, leading to inefficiencies, delays, and increased costs for businesses and consumers alike. Politically, tariffs erode trust and cooperation, potentially affecting broader collaboration on issues like climate policy, innovation, and security.

Over time, Canada may adopt a more protectionist stance, reshaping supply chains and reducing reliance on the U.S. market. This shift could diminish bilateral trade volumes and weaken the economic partnership that has long underpinned prosperity on both sides of the border.

Tariffs also risk fueling inflation, slowing GDP growth, and deterring investments on both sides of the border—making North American industries less competitive globally.

In the writer’s view, these tensions are unnecessary and risk undermining a vital economic relationship with what could be long term implications.

SNP

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