Donald Trump is threatening to use “economic force” to make Canada the 51st American state. While his comments may be reckless, they are in part due to Canada’s over-reliance on the United States market in terms of trade.

The benefits of international trade are undoubtedly positive. It’s well-established that when countries can produce a product or service more cheaply than others, giving them what’s known as a “comparative advantage,” all other nations engaged will gain from that trade.

There are additional gains that come from economies of scale as companies get access to much larger markets than are available domestically. These include improvements in efficiency that arise through enhanced market competition, resulting in lower costs of production and reduced prices for consumers, and increases in the variety of goods and services available.

Canada has outgrown many of its protectionist roots and is now a trading nation. Despite having only 0.5 per cent of the world’s population, Canada has 2.2 per cent of the total of world trade. Exports of goods support one out of every six Canadian jobs.

While the Canada-United States-Mexico Agreement (CUSMA) and its predecessor, the North American Free Trade Agreement (NAFTA), garner most of the headlines, Canada has a total of 15 free-trade agreements covering 61 per cent of world GDP, providing Canadian companies with access to 1.5 billion consumers worldwide.

And Canada is seeking even more free-trade agreements, given their demonstrated benefits.

But the key challenge Canadian policymakers face is an over-reliance on the U.S. as Canada’s primary market, with 75 per cent of all Canadian exports headed........

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