States that supported Trump would get hit hardest in a trade war with Canada

Canada's Prime Minister Justin Trudeau (R) meets with U.S. President Donald Trump during the G7 Summit in the Charlevoix town of La Malbaie, Quebec, Canada, June 8, 2018.

Christinne Muschi | Reuters
Canada’s Prime Minister Justin Trudeau (R) meets with U.S. President Donald Trump during the G7 Summit in the Charlevoix town of La Malbaie, Quebec, Canada, June 8, 2018.

Canada on Friday fired the latest round in a widening trade war sparked by President Donald Trump‘s tough trade stance that helped him win the 2016 presidential election.

A closer look at state-level trade data, though, may give many of Trump’s supporters second thoughts. The data suggests that several of the states that sent him to the White House are the ones with the most to lose in the battle.

Trump’s decision to slap heavy tariffs on imported steel and aluminum infuriated allies like Canada, Mexico and the EU.

Canadian Foreign Minister Chrystia Freeland on Friday announced retaliatory tariffs, effective July 1, of as much as 25 percent on some $12.6 billion of U.S. imports. The list includes ketchup, lawn mowers, toilet paper, sleeping bags and playing cards. She told reporters Canada is not looking to escalate the trade dispute, but also said her country would “not back down.”

A CNBC analysis of 2016 voter turnouts and trade flows with Canada shows that states such as Ohio, Texas and Indiana that supported Trump generally enjoy a surplus in goods trade with Canada. By contrast, the biggest goods trade deficits with Canada are in states such as California and Illinois that voted for Clinton.

The major exception is Michigan, which runs a large trade deficit in goods with Canada and voted for Trump by a slim margin in 2017.

Trump’s trade complaints also include a fundamental misreading of the overall U.S. trade position with Canada.

Trump insists that trade relations are unfair because of a large U.S. trade deficit in goods with Canadian producers, suggesting that Canada is “winning” on trade.

That claim ignores a full accounting of the exchange of U.S. goods and services with Canada. Last year, goods exports totaled $282.5 billion; goods imports totaled $300.0 billion, for a trade deficit in goods of $17.5 billion, according to White House data.

But the U.S. economy, and the bulk of jobs it produces, is much more heavily weighted toward the delivery of services, from the production of television and movies to the delivery of a college education.

Those services also represent a major U.S. export. When a family from Montreal visits Disney World in Florida or a student from Toronto pays tuition to a university in Kansas, that exchange represents an export of U.S. services.

As it does with most of the rest of the world, the United States runs a trade surplus in services with Canada. Last year, services exports were $58.7 billion; services imports were $32.8 billion, for a services trade surplus of $25.9 billion.

That services surplus more than offset the deficit in goods, giving the U.S. an overall trade surplus with Canada of $8.4 billion.

— Reuters contributed to this report.

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