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.
