Canada's June trade numbers surprisingly strong despite U.S. tariffs on metals

Dofasco

Dofasco

Reflecting an increase in imports and a decrease in exports, the Commerce Department released a report on Friday showing the USA trade deficit widened in the month of June.

On a volume basis, exports were up 2.1 per cent while imports were down 1.2 per cent.

Exports jumped by 4.1 percent from May to C$50.70 billion on higher shipments of energy products and aircraft, in particular business jets.

"It's unclear, however, if the overall export surge can be sustained". Last month, the Trump administration began following through with a March threat of tariffs on tens of billions of dollars of imported Chinese goods, prompting China to respond with retaliatory levies on high-value US exports such as soybeans.

The country saw a 4.1 percent increase in exports compared with May, reaching 50.7 billion Canadian dollars (roughly 39 billion US dollars), due to spiked exports of energy products and aircraft.

Statscan noted that exports to the USA of Canadian steel products subject to the new tariffs plunged 37 per cent in June, after having surged 40 per cent over the prior three months.

Friday's data provided evidence that USA steel and aluminum tariffs were having such an effect.

The June deficit of C$626 million ($482 million) - the lowest since the C$485 shortfall recorded in January 2017 - was far smaller than the C$2.30 billion predicted by analysts in a Reuters poll.

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"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".

A widening trade deficit is one reason economists expect US growth to slow in the second half of the year after hitting a 4.1 per cent annual clip in the second quarter.

Canada's largest trading partner, the United States, was the destination for a record $37.1 billion of exports, up 2.5 per cent - mainly because of passenger cars and light trucks.

Rising oil prices also boosted the value of American crude exports, which were the highest on record at $20.4 billion.

The United States ran goods deficits in June of $33.5 billion with China, up 0.9 per cent from May; $7.4 billion with Mexico, up 10.5 per cent; and $2 billion with Canada, up 39.7 per cent.

Soybean exports remained strong in June.

Canada imported products worth $51.3 billion in June, despite increases in seven of 11 product sections. The government reported last Friday that trade contributed 1.06 percentage points to the economy's 4.1 percent annualized growth pace in the second quarter. There were decreases in imports of computers and telecommunications equipment.

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