For years, Americans have watched the gap in prosperity between themselves and their northern neighbors widen.
The White House’s latest outburst against Canada, which even involved jokingly renaming Lake Ontario as Lake America after talks collapsed, rests on the claim that “Canada has been ripping off the United States for decades.” At least, that was the assertion echoed in a August 25 press release about the tariff dispute. But if that claim is true, why are Canadians poorer than Americans and slipping farther behind?
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Americans Grow Wealthier More Quickly Than Canadians
A fresh analysis from Canada’s Fraser Institute shows that, although Canada began the century with hopeful prospects for its economy, the years that followed reveal a lag behind the United States. If Canadians are exploiting our proximity, they aren’t doing so very effectively.
“In 1999, inflation-adjusted gross domestic product (GDP) per person in the US stood CA$10,766 higher than in Canada. By 2024, that gap had more than doubled to CA$23,757,” write study authors Grady Munro, Jake Fuss, and Joel Emes. “Similarly, in 2010, inflation-adjusted median employment income in the US exceeded Canada by CA$6,126. By 2024, that gap had grown to CA$8,663.”
The Fraser analysis notes that since 1999, government-sector employment has grown faster than private-sector employment in Canada. The opposite trend has held in the United States. And while Canadian workers boosted their productivity by 26.7 percent since 1999, Americans increased productivity by 67.9 percent.
Canada’s relatively slower progress in prosperity compared to the United States is, without doubt, a source of frustration for Canadians. As international communications strategist James Stranko observed recently in a Wall Street Journal column, Canada has long defined itself as the “un-America” and most of Canada’s major moments of national unity arose from pushing back against, or shielding itself from, American power.
The Canadian Century That Wasn’t
The Fraser authors emphasize this point, quoting Sir Wilfrid Laurier, Canada’s seventh prime minister, who in 1904 stated, “the nineteenth century has been the century of United States development…The twentieth century shall be the century of Canada and Canadian development.” When the 20th century proved decent but not spectacular for Canada, expectations for a Canadian watershed shifted to the 21st century. Once again, Canada has performed adequately, but not exceptionally well in comparison with the southern behemoth that Canadians use as a standard of comparison.
“Policymakers have thus far squandered the Canadian Century,” adds the Fraser study. “In particular, Canada began to squander this opportunity after 2014. Before 2014, Canada largely kept pace with, or in some instances exceeded, the US across several metrics.”
World Bank data illustrate the challenge. In 2000, per capita GDP was $36,330 in the U.S. and $24,271 in Canada in current U.S. dollars. The gap nearly disappeared about a decade later—only to widen again shortly afterward. GDP per capita stood at $90,026 in the U.S. last year and $55,697 in Canada. The Fraser study compiles data from various sources, but they converge on a similar pattern of Canada lagging behind the United States.
“From 1999 to 2024, Canada’s GDP per person rose by 23.8%, while the United States climbed by 41.5% over the period. In other words, U.S. per‑person GDP grew about 1.7 times faster than Canada since 1999,” write Munro, Fuss, and Emes. Or, put differently, Canadian per‑capita GDP stood at 81.7 percent of the U.S. level in 1999 and 71.5 percent in 2024.
Evaluating another metric, the Fraser study notes that in 2010 the median income in Canada was 32,580 Canadian dollars versus 38,706 in the United States, a gap of 6,126 in favor of the U.S. Using Canadian dollars, that gap narrowed in the following years, but by 2024 the median employment income had risen to 37,361 in Canada and 46,024 in the United States, leaving a gap of 8,663. In plain terms, Canada’s median employment income was 84.2 percent of the U.S. figure in 2010 and 81.2 percent in 2024.
Canada has grown more prosperous over time, but it still trails behind the widening wealth of the United States.
Hobbled by a Growing Government
A major part of the issue is that government employment has expanded more quickly in Canada than in the United States, outpacing private-sector job growth. In 1999, private-sector jobs accounted for 85.8 percent of all employment in the U.S. and 81.2 percent in Canada. By 2024, private-sector employment had nudged up to 86.5 percent of total jobs in the U.S. while slipping to 78.5 percent in Canada. This shift means the private sector must shoulder a larger share of financing the expanding public sector: “New government-sector jobs bring a tax-related cost that limits how much government growth can contribute to overall economic expansion.” At the same time, productivity has declined among Canadian public workers while rising in the private sector.
To an even greater extent than in the United States, Canada’s private economy is restrained by a costly and inefficient government.
“Despite some early hopes before 2014, Canada has made essentially no economic progress relative to its southern neighbor and has, in fact, fallen further behind its early-2000s position,” the Fraser authors conclude.
It is hard to identify a case where Canada was “ripping off the United States,” regardless of what the Trump administration asserts. Instead, Canada appears to have hampered its own economic outlook by allowing the government to grow, thereby draining wealth from the productive private sector. Yes, Canada has some misguided protectionist measures—including interprovincial barriers—but the United States has its own share of folly, especially under the current administration. Both nations are now doubling down on tariffs that hurt their own economies.
The true question in the years ahead is who will bear more damage from the escalating trade war between the U.S. and Canada. The country that does a better job of increasing prosperity will likely benefit from the harsher policies imposed on the other nation’s citizens by their own government. Here’s hoping the less self-destructive competitor comes out ahead.
