The economies of Canada and the United States are similar because both are developed countries. While both countries feature in the top ten economies in the world in 2022, the U.S. is the largest economy in the world, with US$24.8 trillion, with Canada ranking ninth at US$2.2 trillion.
Overview
This article compares the economies of Canada and the United States based on GDP, debt-to-GDP ratio, inflation, unemployment, public debt, taxation, and purchasing power parity.
In 2024 the population of Canada was estimated to be 40,784,365 (Q1, 2024) compared to 36,991,981 in 2021 while the population of the United States was estimated to 339,268,209 in Q1 2024, more than eight times larger than Canada.
The United States GDP was $24.8 trillion in 2021. The United States has the largest economy globally and Canada ranks 9th at US$2.015 trillion.
The US share of the global market economy estimated at US$79.98 trillion, was c. 25% in 2018, which is down from 35% in 2005. China's global e-commerce market share has grown rapidly from less than 1% in c. 1998 to 42% in 2018. China now has second largest economy in the world with a value of US$14 trillion. Canada has been the G7 leader in economic growth since 2016. Topics covered include competition, debt, sustainability analysis, economic indicators, fiscal policy, fiscal sustainability, monetary policy, tax policy and trade policy.
The International Monetary Fund's annual World Economic Outlook provides the main economic indicators in Canada in selected years between 1980 and 2017. Inflation under 2% is in green.
{| class="wikitable" style="text-align:center;" size="small"
!Year
!GDP<br /><small>(in Bil. US$ PPP)</small>
!GDP per capita<br /><small >(in US$ PPP)</small>
!GDP growth<br /><small>(real)</small>
!Inflation rate<br /><small>(in Percent)</small>
!Unemployment <br /><small>(in Percent)</small>
!Government debt<br /><small>(in % of GDP)</small>
|-
|1980
|287.3
|11,739
|2.1%
|10.2%
|7.5%
|45.1%
|-
|1992
|585.4
|20,668
|0.9%
|1.5%
|11.2%
|89.2%
|-
|2007
|1,287.7
|39,201
|2.1%
|2.1%
|6.0%
|66.8%
|-
|2008
|1,326.1
|39,944
|1.0%
|2.4%
|6.2%
|67.8%
|-
|2009
|1,296.7
|38,615
|−3.0%
|0.1%
|8.4%
|79.3%
|-
|2016
|1,687.3
|46,606
|1.4%
|1.4%
|7.0%
|91.4%
|-
|2017
|1,769.2
|48,265
|3.0%
|2.1%
|6.3%
|89.7%
|}
In 2016, the GDP per capita in Canada was compared to in the US.
This table show the same economic indicators in the United States in selected years between 1980 and 2017. Inflation under 2% is in green.
{| class="wikitable" style="text-align:center;"
!Year
!GDP<br /><small>(in Bil. US-Dollar)</small>
!GDP per capita<br /><small >(in US-Dollar)</small>
!GDP growth<br /><small>(real)</small>
!Inflation rate<br /><small>(in Percent)</small>
!Unemployment <br /><small>(in Percent)</small>
!Budget balance<br /><small>(in % of GDP)</small>
!Government debt<br><small>(in % of GDP)</small>
!Current account <br>balance<br><small>(in % of GDP)</small>
|-
|1980
|2,862.5
| 12,575
|−0.2%
|13.5%
|7.2%
|−2.6%
|n/a
|0.1%
|-
|1992
|6,539.3
|25,467
|3.6%
|3.0%
|7.5%
|−4.5%
|n/a
|−0.8%
|-
|2007
|14,477.6
|47,955
|1.8%
|2.9%
|4.6%
|−0.8%
|64.6%
|−4.9%
|-
|2008
|14,718.6
|48,302
|−0.3%
|3.8%
|5.8%
|−4.6%
|73.7%
|−4.6%
|-
|2009
|14,418.7
|46,909
|−2.8%
|−0.3%
|9.3%
|−11.2%
|87.0%
|−2.6%
|-
|2016
|18,624.5
|57,559
|1.5%
|1.3%
|4.9%
|−2.2%
|107.2%
|−2.4%
|-
|2017
|19,390.6
|59,501
|2.3%
|2.1%
|4.4%
|−2.5%
|107.8%
|−2.4%
|}
International trade
Canada and the United States are member states of international trade organizations, including NAFTA—replaced by the United States–Mexico–Canada Agreement (USMCA) negotiated in 2018, G7, G20, OECD and WTO.
According to a Global Affairs Canada 2018 report, Canada's exports increased 5.7% to a record high in 2017 of $CAD546.7 billion—$29.2 billion above the exports level in 2016. In 2017 imports also rose to an all-time high of $CAD1,108 billion. In 2017, Canada's exports increased to Japan, India, South Korea, Germany, the United Kingdom, and China. During the same period, US imports increased by $155.1 billion or 7.1% up from $2,187.8 billion in 2016. In 2017 energy-related products represented the largest increase in both imports and exports in the US. The Organisation for Economic Co-operation and Development (OECD) tracks price comparisons for industrialized countries, and in June 2015 Canada was listed as 6% more expensive than the United States, when the US dollar was used as the reference currency.
Although wealth is more highly concentrated in the US, the median (50th percentile) worker has about 23% more purchasing power as well. In terms of purchasing power parity, the most recent statistics from the IMF has Canada (US$35,494) lower than that in the United States (US$43,444).
Debt-to-GDP ratio
The OECD tracks member countries debt-to-GDP ratio, the "amount of a country's total gross government debt as a percentage of its GDP", as an "indicator of an economy's health and a key factor for the sustainability of government finance."
This compares United States public debt and Canadian public debt based on data from the CIA's World Factbook and the IMF.
{| class="wikitable sortable" style="text-align:right;" border=1
|+ Sortable table (not available on mobile)
|-
! Country !! Gross public debt<br />as % of GDP<br />(CIA) !! Date !! Total (gross) government<br />debt as % of GDP<br />(IMF) !! Net government<br />debt as % of GDP<br />(IMF) !! Date !! Region
|-
|align="left"| || 98.2 ||2017|| 89.688|| 27.793||2017|| align="left" |North America
|-
|align="left"| ||103.8 ||2017||107.785|| 82.268||2017|| align="left" |North America
|}
According to the Canadian Finance Minister Bill Morneau in his February 27, 2018 presentation of the Canadian federal budget for the fiscal year 2018–2019, the deficit was projected to be CDN$18.1 billion.
According to the Fraser Institute, government spending at all levels (federal, state/provincial and local) has traditionally been higher in Canada than the United States.
Taxation
Personal income taxes
According to the OECD's report entitled "Taxing Wages 2018" in 2017, the "employee net average tax rate for a single person in Canada with no children was 22.8%, compared to 26.1% in the United States. Canada placed "11th lowest among 35 OECD countries".
In 2016, Canada's tax revenue to GDP ratio was 31.7% ranking 24th out of 35 OECD countries, compared to the US at 26% ranking at 30th, according to the OECD.
Corporate taxes
According to a table updated to January 2018, produced by the Netherlands-based KPMG, one of the world's Big Four auditors, the corporate tax rate in Canada was 26.50% compared to 27% in the United States.
KPMG calculated the Canadian corporate tax by adding the federal and provincial tax components. The federal component is 15%. Each of the ten provinces and three territories have 2 different tax rates, one which is lower for small businesses which ranges from 0 to 4.5%, and higher for all other corporations, which ranges from 11.5 to 16%. Combined with the federal tax component the total can vary from 26.5% to 31%.
In Canada in October 2018, 11,200 new full-time jobs were added, lowering the unemployment rate to 5.8%—a "40-year low, underpinning expectations that the Bank of Canada would keep raising interest rates". However, the "labor participation rate fell to its lowest point since October 1998—65.2%. A 2018 Bloomberg article described the "disguised unemployed", including workers described as "marginally attached" workers who are looking for work but have not actively in the last month. By 2014, labor force participation rate had fallen to 63% in the US, the "lowest level in a generation". At the height of the 2008–2009 recession in Canada, unemployment peaked at 8.3 percent. The subprime mortgage crisis and the 2007–2009 which followed, increased the unemployment rate to a peak of 10% in October 2009. Since then, the unemployment rate has been steadily falling. It reached 5% in December 2015.
Government spending
Government spending refers to public expenditure on goods and services.
General revenue (Canada)
In FY2017 the Canadian federal government spent $311 billion. Elderly benefits, which "cost $48.1 billion, or 15 cents of every tax dollar"—which include the Old Age Security (OAS) and Guaranteed Income Supplement (GIS)—represented the "biggest single expense". Other expenses included "All other departments and agencies" $51 billion, Other transfer payments 41.5 billion, Canada Health Transfer 36 billion, National Defence 25 billion, Public Debt Charges 24.15 billion, Children's Benefits 22 billion, Employment Insurance 20.7 billion, Fiscal Arrangements 17.1 billion, Canada Social Transfer 4.3 billion, Crown Corporations 8 billion, and Gas Tax Fund 2 billion. Interest on debt totaled 263 billion representing 1.4% of GDP. such as made up of goods and services that Canadians typically buy, such as food, housing, transportation, furniture, clothing, recreation, and other items, On October 24, 2018 the Bank of Canada raised its benchmark interest rate to 1.75%, the highest it has reached in ten years to prevent inflation. The key interest rate had been kept low in response to the 2008 economic slowdown. By raising the rate, the Bank of Canada is indicating that the Canadian economy no longer needs "stimulus."
Social mobility
According to an OECD publication entitled A Broken Social Elevator? How to Promote Social Mobility, with the rise in income inequality since the 1990s, social mobility has shifted so that fewer people in the bottom quintiles have moved up the ladder; those in the higher quintiles remain wealthy. Based on the OECD average in this 2018 report, it takes an estimated 4 generations for a low-income family in Canada to earn the Canadian average income; the OECD average is an estimated 4.5 generations and in the United States it takes 5 generations or 150 years to earn the American average income. The article noted that over previous five-year period, Canada "outperformed" the US on "labour productivity growth".
According to a 2004 article, Canadian workers were estimated to be 82% as productive per hour as their American counterparts. The industries with the largest productivity advantages for the US are the manufacturing (particularly electronics and computer), finance, and service sectors. Industries where Canada is more productive than the US are the construction and natural resources sectors with Canadian workers achieving 129% relative productivity.
The productivity gap began to widen again in the 1990s, particularly in the manufacturing sector. According to a 2005 article, by 2000, this was called Canada's "Excellence Gap" by the Chief Economist of Canadian Manufacturers & Exporters. The United States has the second-highest productivity of the G8 countries, while Canada's is 5th based on the 1997 estimate.
Five main reasons for the productivity gap: the lower capital intensity of economic activity in Canada; an innovation gap in Canada relative to the United States; Canada's relatively underdeveloped high-tech sector; and more limited economies of scale and scope in Canada.
See also
- Economy of Canada
- Economy of the United States
- OECD Main Economic Indicators (MEI)