Canada’s trade deficit narrows to $1.9B in April

As a result of rising exports and declining imports, Canada’s merchandise trade deficit with the world narrowed to $1.9 billion in April from $3.9 billion in March, reports StatsCan. The deficit was lower than economists had expected.

Canada’s exports rose 1.6% to a record $48.6 billion in April. Imports were down 2.5% to $50.5 billion, after reaching a record high in March. In real (or volume) terms, exports rose 1.2% and imports fell 2.4%.

The positive exports reading was the sixth increase over the past seven months. “Higher exports of metal and non-metallic mineral products, consumer goods and energy products were partially offset by lower exports of aircraft and other transportation equipment and parts,” says StatsCan. Total exports rose 3.1% year over year.

Exports of unwrought precious metals and precious metal alloys led the increase for metals in April, up 25.3% to $1.6 billion.

Exports of consumer goods, up 5.4% to $6.2 billion in April, included increases in exports of pharmaceutical and medicinal products, mostly to the U.S. Exports of energy products rose 2.3%, the eighth monthly increase in nine months.

Imports exhibited declines in eight of 11 sections, including autos and auto parts. “Following two months of strong increases, imports of motor vehicles and parts decreased 5.8% to $9.7 billion in April,” says StatsCan. Passenger cars and light trucks were down 8.9%, returning to more typical levels following higher than usual import levels for light trucks in March.

Imports of consumer goods also contributed to the overall decrease, down 4.9% to $10.5 billion in April.

Import declines were partially offset by higher imports of energy products, up 8.5% to $3.4 billion. “Temporary shutdowns in Canadian refineries in April led to higher imports of motor gasoline and diesel fuel to meet domestic demand,” says StatsCan.

Comparisons with U.S.

After five monthly contractions, Canada’s merchandise trade surplus with the United States widened to $3.6 billion in April from a $2-billion surplus in March.

So far this year, the U.S. has a trade deficit that’s up 11.5% from a year ago despite President Donald Trump’s vow to reduce the gap through new tariffs on imports and renegotiated trade deals. However, record U.S. exports shaved the U.S. trade deficit in April for the second straight month.

The U.S. Commerce Department said Wednesday that the trade deficit dropped to US$46.2 billion in April, down from US$47.2 billion in March and the lowest since September. Exports rose to a record US$211.2 billion; imports dipped to US$257.4 billion.

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In an emailed note to clients, CIBC director and senior economist Royce Mendes says today’s Canadian trade data suggest that net trade started the second quarter as a positive contributor to GDP. Further, he says, “The narrower-than-expected deficit has been positive for the loonie.”

Comparing the average exchange rates of March and April, the Canadian dollar gained 1.2 U.S. cents relative to the American dollar, says StatsCan. This followed a decline of 2.1 U.S. cents in March.

Also read:

External risks more acute for Canada than in recent past: IMF

Causes and effects of Canada’s lower growth

What strong U.S. growth means for Fed rate hikes