Canada’s Dairy Industry and Wisconsin Electoral Votes
Frankly, we are suspicious that Trump’s focus on Canada’s 300% tariff on imported dairy products may not be that important, but chosen just because it sounds like a good arguing point to put tariffs on many other Canadian products. So we try to evaluate this. The state that could most benefit from importing dairy to Canada is Wisconsin, whose football fans typically wear “cheese heads’. Wisconsin was one of the three large states that went for Trump by less than 1%.
We are also suspicious that Trump held Monday’s news presentation of the not quite completed trade deal with Mexico to regain the headlines after Sen. McCains’s death, and Trump’s neglect of recognizing McCain’s sacrifice, dedication and importance. Evidence of the Rush was that Mexico’s President Enrique Pena Nieto was not there in person, but only contacted by telephone. In this talk, Trump tried the obvious ploy of saying that he didn’t care if Canada negotiated, because it was such a small country in terms of trade.
Let’s start with Canada’s size. It’s 2016 population is 36.3 million, slightly smaller than California’s at 39.3 million. If Canada is considered to small to matter to Trump, what about slightly larger California, which would have the world’s fifth largest economy, if a country.
Canada’s trade in 2017 was $1.55 trillion in exports, and $2.34 trillion in imports, for a trade total of $3.89 trillion. So its imports are 51% larger than its exports. With respect to the US, US exports to Canada $282.3 billion, while imports to the US from Canada were $299.3 billion, so we had a $17.1 billion trade deficit with Canada in 2017. The year before, the US had a $12.5 billion trade surplus with Canada.
In contrast to the trillion dollar numbers in total import or exports, or the $300 billion in US trade, Canada’s total Dairy Manufacturing Shipments were $15.2 billion, and net farm cash receipts were $6.17 billion in 2016. Even smaller, Canada’s Dairy imports were $0.969 billion, and its Dairy exports were $0.235 billion. So Canada already imports 4.1 times as much dairy as it exports! So Canada consumes most of its dairy, and only imports 6.4% additionally, and only exports 1.54% of its dairy! Whatever the tariffs are, it’s not as if Canada is massively exporting dairy to the US unfairly.
So out of $2.34 trillion of Canadian imports, Trump is focusing on correcting Canada’s $0.235 billion of dairy exports as being too much? Maybe more favorable to Trump, we could say that if the US completely supplied Canada with dairy, it could make a profit of $6.17 billion out of a $2.34 trillion in Canadian trade imports, or, wait for it, 0.04% or 1/2,340 of Canada’s imports. To spell out how small this is in terms Trump deals in, he would have to play 33 days of golf at par to have one single putt miss to notice something as small as this ratio.
So bringing up Canadian dairy is a national sham by Trump, but meaningful to Wisconsin’s 10 electoral votes, where Trump beat Clinton by 1%, 47.9% to 46.9%, or only 27,257 votes!
Another way to look at it is that Canada will support its dairy industry and feel bad about American imports if we start a trade war with Canada. So Trump appears to be risking $300 billion worth of exports to Canada for a mere $6 billion in dairy products. That is a bad 300 to 6 leverage against you, or 50 to 1 against you. Even using the gross Canadian Dairy at $15 billion, this is still 20 to 1 against you. Well, Trump did drive his Atlantic City casinos into bankruptcy.
To see why Canada would protect their dairy with tariffs, the manufacturing sector of dairy has 22,904 jobs, and the farm operations have 18, 805 jobs, totaling 41,709 jobs. The same way that Trump holds a news conference with a plant visit if he saves 700 jobs from leaving the country, you can imagine how Canada feels about protecting these jobs.
We see that the total number of dairy jobs in Canada is the same order as the number of votes, that Trump needs to keep in Wisconsin. Of course, for every dairy worker, there are three family votes, plus the multiplier for jobs created as accessory to any employed workers.
Of course, Trump’s real negotiations will be about auto industry and steel jobs, as he did with Mexico, in order to maintain his slim leads in rust belt states. He just couldn’t resist in seizing on a 300% example to sway public opinion. This is similar to his finding one crime by somebody in a group as large as 11 million, in order to condemn the entire group.