The trade deficit with Canada that’s upset Trump so much is due to crude the U.S. buys at a discount for the Midwest. ‘It’s the only oil they can use’

Canada may seem an unexpected target for a U.S. trade dispute, as no country buys more from the United States than its northern neighbor. American farmers view Canada as their second-largest export market, and a North American trade pact, negotiated during Trump's first term, means most American products enter Canada duty-free. Nonetheless, President Trump perceives Canada as a predatory nation seeking to cheat the U.S. and cripple its industries.

Since the collapse of recent trade talks, tensions between the U.S. and Canada have escalated. Trump has made personal attacks and disparaged Canada as weak. Responding to the deteriorating relations, Trump has threatened tariffs and even proposed renaming Lake Ontario to "Lake America." As a result, Canada retaliated by implementing its own tariffs on various American products, including whey, alcoholic beverages, and motorcycles.

The trade deficit between the two nations stands at $27.3 billion, a figure Trump finds frustrating. However, this deficit can largely be attributed to the demand for Alberta's heavy sour crude oil by U.S. refineries in the Midwest. Canada's oil is cheaper than the U.S. benchmark, and there is no alternative source of this specific type of oil for the U.S. at the moment. To bridge the gap, a deal could potentially resolve the ongoing tensions between the two countries.