Trade between Canada and the United States is increasingly to Canada’s advantage and the one it bothers the most, the next American president, is partly responsible.
Published at 6:00 a.m.
The decline in the Canadian dollar accelerated by Donald Trump’s threat to impose tariffs on all Canadian products has indeed made Canadian products more attractive. The devalued loonie boosted Canadian exports, which increased 6.8% to the United States from October to November.
This surge in exports to the United States caused Canada’s trade surplus with the United States to increase from 6.6 billion in October to 8.2 billion in November, according to Statistics Canada.
This trade surplus is regularly attacked by the next American president, who likens it to “subsidies” from the United States to Canada that he wants to see stopped.
In the short term, however, the weakness of the Canadian dollar will continue to stimulate exports to the United States, predicts Marc-Antoine Dumont, senior economist at Desjardins. “The November figures reflect the devaluation of the dollar in October and November, which continued in December,” he explains. We can expect this to continue. »
A threat that has the opposite effect
Trump’s threats of tariffs also helped in spite of himself to stimulate Canadian exports to the United States. American companies are responding to these threats by advancing their purchases of Canadian products before their prices increase.
We have indications that lead us to believe that preventive stockpiling has begun by American companies.
Marc-Antoine Dumont, senior economist at Desjardins
This reaction by businesses when threats of tariffs are telegraphed is usual and was expected by economists. “The same thing happened in 2018,” recalls Marc-Antoine Dumont. Canada’s exports of aluminum and steel had increased sharply before the imposition of U.S. tariffs. »
This time, Donald Trump’s threats do not only target a few products, such as aluminum and steel, but all exports from Canada. The impact of preventive storage could intensify and be more pronounced than in 2018.
“We will have a clearer picture with the international trade figures for December and January,” said the Desjardins economist.
Trade deficit
Despite a growing trade surplus with the United States, Canada’s trade balance with all countries of the world remained in deficit in November for the ninth consecutive month.
From October to November, Canada’s overall trade deficit fell from $544 million to $323 million.
The increase in the merchandise trade surplus with the United States helped to reduce this overall trade deficit.
Canada has positive trade with the United States and the United Kingdom, but deficit trade with China, Mexico, Japan and Germany.
Canada’s trade balance could return to positive territory if the acceleration of purchases of Canadian products by American companies to avoid customs duties continues, estimates National Bank economist Jocelyn Paquet.
The December figures should confirm that merchandise trade contributed positively to economic growth in the fourth quarter, he said.
