The trade surplus between Canada and the United States has widened, underscoring the significant role that its southern neighbor plays in its economy. This development comes as President-elect Donald Trump continues to threaten broad tariffs on Canadian goods destined for the U.S., sparking alarm among government officials and industry groups.
Trade Deficit Narrows
In November, total imports exceeded exports for the ninth straight month, bringing the trade deficit to $323 million, down from $544 million in October. This narrowing of the country’s overall deficit is largely due to a significant increase in Canada’s exports to the U.S., which rose 6.8% in November, while imports increased by 4.1%.
Surplus with U.S. Widens
Canada’s trade surplus with the U.S. widened to $8.2 billion in November, driven by higher prices and a weaker Canadian dollar. The depreciation of the Canadian currency since October has had a significant impact on import and export statistics.
Exports to Other Countries Decline
On the other hand, exports to countries other than the U.S. fell 10.3% in November, driven by lower exports of gold to Hong Kong and nickel to Norway. Imports from other countries excluding the U.S. declined 1.9%.
Statistics Canada Cautions on Data Accuracy
The agency also flagged that a Canada Border Services Agency initiative had delayed some October and November import data and estimates had been added to the collected values. The statistics should be used with caution, as significant revisions are possible.
Economists’ Views
Andrew DiCapua, senior economist at the Canadian Chamber of Commerce, noted that "Canada’s merchandise exports have gone up again, thanks to higher prices and a weaker dollar." However, he cautioned that it’s tough to pinpoint any clear trends for the last few months of 2024 due to changes in data collection.
Stephen Brown of Capital Economics told investors in a report that the third consecutive rise in export volumes in November provides further evidence that the economy was gaining momentum at the end of last year. However, he also warned that "US tariffs could cause the recovery to go into reverse this year."
Tariff Threats and Canadian Dollar
Benjamin Reitzes, rates and macro strategist at Bank of Montreal, stated in an email that "tariffs continue to be a dark cloud hanging over Canada and trade in particular." He also noted that "nothing here to change the view of another Bank of Canada cut in January, but things could get murky after that with the Canadian dollar already much weaker."
Conclusion
The widening of Canada’s trade surplus with the U.S. is a significant development, especially given President-elect Trump’s continued threats on tariffs. The impact of these tariff threats and changes in data collection should be carefully monitored by economists and policymakers.
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