Trade gap hits 17-month low
- August 8, 2018
Canada’s trade gap narrowed in June to its lowest level in 17 months.
The Globe and Mail reports that the narrowing came as Canada’s exports reached record levels despite protectionist pressures.
Statistics Canada reported last Friday that the merchandise trade deficit fell to $626 million, down from $2.7 billion in May. Exports rose by 4.1 per cent – their biggest one month increase since November 2016 – to a record $50.7 billion. Imports fell 0.2 per cent.
By volume, exports were up 2.1 per cent while imports were down 1.2 per cent.
The June deficit was “a happy surprise” for economists, the Globe and Mail says; they had expected the trade gap to stay over $2 billion, where it’s been for much of the past year. The improvement also comes despite trade hostilities with the US, which imposed tariffs of 25 per cent on Canadian steel and 10 per cent on aluminum at the beginning of June, while threatening levies on Canadian autos and parts.
Exports to the US were up 2.5 per cent month over month, pushing Canada’s merchandise trade surplus with the US to $4.1 billion from $3.3 billion. A weaker Canadian dollar in the month was a contributing factor.
Exports increased in eight of 11 industry sectors, while imports, despite their overall small decline, were up in seven of 11 sectors.
“We thought steel and aluminum tariffs would be the story of this morning’s trade report, but strong export growth in most other sectors swamped the impact of those new duties,” said Royal Bank of Canada senior economist Josh Nye in a research report.
Statscan noted that exports to the US of Canadian steel products subject to the new tariffs plunged 37 per cent in June, after having risen 40 per cent over the prior three months. Exports of aluminum subject to the tariffs fell seven per cent, after jumping 29 per cent in the prior three months.
But shipments to the US of autos – on which the US launched a formal investigation in June to consider tariffs – were the biggest contributor to June’s growth in exports to the US. Exports of passenger cars and light trucks were up five per cent in June.
National Bank of Canada economist Kyle Dahms suggested US tariff threats may be temporarily driving US demand for some Canadian goods.
“Trade relations with the U.S. could be causing importers down south to stock up,” Dahms said in a research note.
Source: Globe and Mail