Yes, the tax law for the credit is always the smaller of tax paid to the foreign country or U.S. tax on the same amount.
Deluxe contains the 1116 and must be filled out. Since it is your first year, perhaps the form did not get filled in completely and correctly. You want to use the credit, not the deduction since that is what you have described. Choosing deduction, would add it to sch A and could be the reduction difference you are seeing.
You should use RIC for the country since you are using regulated investment companies, Fidelity and Vanguard. You must enter the foreign income and foreign tax.
Reference:
Instructions for Form 1116
Claiming the Foreign Tax Credit with Form 1116 - TurboTax
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