FACT FOCUS: Trumps claims the US subsidizes Canada. Experts say the numbers don’t add up

Newly-elected Canadian Prime Minister Mark Carney visited the White House on Tuesday in search of common ground during an ongoing trade war that has shattered decades of trust between the his country and the U.S. Although the conversation was civil, President Donald Trump repeated erroneous rhetoric about how the U.S. provides Canada with billions of dollars in subsidies.

“It’s hard to justify subsidizing Canada to the tune of maybe $200 billion a year,” he said. “We protect Canada militarily, and we always will. We not going to, you know, that’s not a money thing. But we always will. But, you know, it’s not fair. But why are we subsidizing Canada $200 billion a year or whatever the number might be? It’s a very substantial number.”

Here’s a closer look at the facts.

CLAIM: The U.S. subsidizes Canada with subsidies of about $200 billion per year.

THE FACTS: This is false. According to the White House, the number is based on the U.S. trade deficit with Canada and higher military spending by the U.S., including expenditures associated with the North American Aerospace Defense Command, or NORAD. An exact total is difficult to discern because there is no publicly available data on NORAD spending. But even the most generous estimates do not put the total costs anywhere close to what Trump claims.

A trade deficit occurs when the cost of a country’s imports are higher than its exports. Using seasonally adjusted data, the U.S. deficit with Canada for both goods and services was $35.661 billion in 2024. It was higher for just goods, ranging from $63.336 billion to $70.603 billion.

The White House put the goods and services deficit with Canada at $53.5 billion. This is closer to the figure from 2022 — $57.565 billion.

Either way, economists agree that describing a trade deficit as a subsidy is wrong.

“That’s never been the definition of a subsidy, a subsidy is defined as a gift without any compensation in return,” said Gary Hufbauer, a senior fellow at the Peterson Institute for International Economics. “So whatever the number is, the concept is way off base.”

Gian Maria Milesi-Ferretti, a senior fellow at the Brookings Institution’s Hutchins Center on Fiscal and Monetary Policy, said a trade deficit occurs based on relative demand in different countries and what they specialize in.

In terms of military spending, the White House also pointed to how much the U.S. and Canada spend on their militaries and what percentage of their gross domestic product that is. This appears to be a reference to NATO’s investment guideline. Member countries agreed in 2006 to commit to spending a minimum 2% of their GDP on their own defense. Some countries, including Canada, have not yet met that guideline, a lapse which Trump often criticizes.

Canada spent $29.3 billion on defense in 2024, which amounted to 1.3% of its GDP. The U.S., which is 13 times bigger than Canada, spent significantly more at $997 billion, or 3.4% of its GDP, exceeding the NATO guideline. Those numbers were slightly lower in 2023 — the data cited by the White House — at $27.2 billion and $916 billion respectively, though the percentages of GDP for both were the same.

According to the International Monetary Fund, Canada’s GDP in 2024 was about $2.241 trillion. This means that the country would have needed to spend $44.82 billion total on defense order to meet the 2% NATO guideline, making it short by approximately $15.52 billion.

“No, they don’t owe us that money, but they aren’t paying their fair share, and that’s a fair criticism.” said Mark Cancian, a senior advisor in the Center for Strategic and International Studies’ defense and security department.

Discounting whether they should be deemed subsidies, adding the trade deficit for goods and services in 2024 to Canada’s gap in defense spending the same year results in a total of only about $51 billion. Using the highest calculation of the goods deficit only for 2024 pushes the total up, to approximately $86 billion.

The White House’s final point was that the U.S. “covers about 60 percent of the bill for NORAD.” Created in 1954 as a means of defense against possible long-range attacks from the Soviets, NORAD is a bi-national organization jointly run by the U.S. and Canada that is charged with preventing air and maritime attacks against North America.

There is no publicly available data on NORAD spending by the U.S. or Canada. The 60% figure cited by the White House refers to a 1985 cost-sharing agreement for the operations and support of NORAD’s North Warning System that is still in place today.

In 2022, then-Canadian Defense Minister Anita Anand announced a $4.9 billion (US $3.52 billion) investment in NORAD over six years and $38.6 billion (US $27.72 billion) over 20 years on an accrual basis.

Defense economists Binyam Solomon and Ross Fetterly quantified NORAD burden sharing by the U.S. and Canada in a paper first published in 2023 by the journal Defense and Peace Economics titled, “Canada and NORAD: Economics and Burden Sharing.”

The pair found that the numbers change drastically depending on how they are calculated. One estimate found that the U.S. shoulders about 97.6% of the North American defense burden while receiving about 64% of the benefits. Canada, meanwhile, contributes about 2% of the burden while enjoying about 36% of the benefits. But leaving out the variable of Canada’s vast exposed border means that the U.S. shoulders the same burden while enjoying 91% of the benefits. In this instance, Canada enjoys just 9% of the benefits.

A sizable portion of NORAD warning and control systems are in Canadian territory, according to the paper.

Cancian explained that the U.S. needs Canada’s help to effectively defend North America from its own land because if air defenses started at the U.S. border, it would be too late to prevent many threats.

“Even if the Canadians pulled out, we’d have to have something like that in place,” he said of NORAD. “So I would not consider that a subsidy at all. Canadians can make a fair argument that we owe them.”

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