(Bloomberg) -- Canada’s merchandise trade deficit was lower than forecast after the U.S. imposed tariffs on steel and aluminum, as oil producers and aircraft makers led exports to a record high.
The trade gap narrowed to C$626 million ($481 million) in June, down from C$2.7 billion a month earlier, Statistics Canada said Friday in Ottawa. Economists surveyed by Bloomberg were expecting a deficit of C$2.3 billion.
Exports rose 4.1 percent to a record C$50.7 billion, with energy shipments rising 7.1 percent to their highest since 2014 and aircraft sales jumping by almost 45 percent. The return of several Canadian refineries to production after shutdowns also played a role in the 0.2 percent decline in imports as demand for foreign gasoline tumbled.
Those boosts to the trade balance more than overcame declines in exports of steel and aluminum to the U.S. of 37 percent 7 percent respectively. President Donald Trump’s administration imposed tariffs of 25 percent on steel and 10 percent on aluminum in June, predicated on national security considerations; Prime Minister Justin Trudeau’s government retaliated dollar-for-dollar on July 1.
Canada’s exports are on pace to advance faster than imports over the next year according to Bloomberg forecasts, reflecting higher crude oil prices and demand for building materials in a growing global economy. 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.
Those risks include talks with the U.S. and Mexico to update the North American Free Trade Agreement, and Trump’s threats of new tariffs on automotive imports.
Other Details
- The trade deficit was the smallest since January 2017
- Exports rose 6 percent between April and June, the fastest quarterly increase in a decade. The quarterly trade deficit narrowed to C$4.9 billion from C$8.6 billion.
- The volume of exports, considered a more reliable reading of economic growth because it strips out price changes, climbed 2.1 percent. Import volumes fell 1.3 percent
- The year-to-date trade deficit of C$13.5 billion is the second-largest on record
- The trade surplus with the U.S. grew to C$4.1 billion in June from C$3.3 billion in May