Canadian exports reach record high despite trade war

Shipping containers at the Fairview Cove container terminal in Halifax on Feb. 11 2009

Canada's total exports increased 4.1 per cent to $50.7 billion in June, the first time they have topped the $50-billion mark.

Canada's overall merchandise trade deficit with the rest of the world dropped dramatically in June to 626 million Canadian dollars (about 482 million USA dollars), the lowest since January 2017, Statistics Canada said Friday.

The June deficit was a happy surprise for economists, who had expected that the trade gap would remain above $2-billion, where it has been for much of the past year. In volume terms, exports grew 2.1 percent.

Canada's merchandise trade deficit was lower than forecast after the USA imposed tariffs on steel and aluminum, as oil producers and aircraft makers led exports to a record high.

On Friday, Trump's chief economic advisor Larry Kudlow told Bloomberg TV that the administration will keep pressing China for trade reform after China on Friday announced a list of $60 billion in US goods that will be impacted by a new tariff.

Exports to the United States were up 2.5 per cent month over month, lifting Canada's merchandise trade surplus with its neighbour to $4.1-billion from $3.3 billion.

Meanwhile, imports from the United States were up 0.3 per cent to $32.9 billion, resulting in Canada's trade merchandise trade surplus with the US rising to $4.1 billion.

"But the first indications for the month suggest that there could be some growth left to come in the second quarter, upgrading the odds of a likely Bank of Canada rate hike in the coming months".

Crude oil exports were mainly responsible for the gain, up 6.6 per cent to $7.2 billion on the strength of prices, but refined petroleum products also rose, by 19.2 per cent, on sales of heavy fuel oils and diesel fuel.

But exports to non-U.S. markets fared even better, surging 8.7 per cent in the month.

Rising demand by US households and businesses is expected to keep supporting purchases of foreign-made goods in coming months. That reflected a jump in shipments overseas of soybeans, up 40 percent in the first half of the year compared with 2017, and petroleum and related products. The Bank of Canada is counting on trade and investment to contribute more to an economic expansion as it raises interest rates, while saying protectionism remains the biggest risk.

Canada imported products worth $51.3 billion in June, despite increases in seven of 11 product sections. Higher shipments of soybeans helped bring the trade deficit in May to its lowest monthly level since late 2016 and, due to seasonal adjustments, provided an outsize boost to second-quarter gross domestic product. Energy exports were up 7.1 per cent month over month, while energy imports were down 15.1 per cent.

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