As a Canadian importer, it’s critical that you stay informed about the various regulatory changes and economic reports to make sure that you’re modifying your business practices and protecting your bottom line.
Earlier this year in May 2021, Statistics Canada released a report on the trade deficit stating the following:
“Canada posted a merchandise trade deficit of $1.1 billion in March as imports climbed to their highest level since May 2019. […] the trade deficit for the month followed two consecutive monthly trade surpluses including $1.4 billion in February and nearly $1.3 billion in January.”
*This quote is taken from a CTV News Business report on the topic of Canada’s trade deficit.
Since that report, Canada actually unexpectedly posted a huge bump — the largest trade surplus since June 2008! Today, we will be taking a look at what this means for the trade community, i.e. Canadian importers and exporters.
The Loonie’s impact on the trade deficit
This deficit was actually posted earlier than initially anticipated by top Canadian economists. On the topic of the May 2021 deficit update, Royce Mendes, a senior economist with CIBC News, commented that: “trade surpluses had been a factor supporting the loonie and the move back into deficit occurred slightly earlier than he had anticipated.”
Canada’s importing & exporting impacts on the trade deficit
Along with this report, Statistics Canada said that, in March, imports rose by 5.5% and all of the tracked sectors in the report benefited from this climb. Notable areas of movement include:
- Energy products: 54.7%
- Crude oil: 19.4%
On the side of exporting, there was upward momentum of a tiny 0.3% overall. But motor vehicles and their parts got a 10.2% boost. However, Statistics Canada was warning of a production slowdown that could impact our bottom line in the coming months: “…production slowdowns due to a global shortage of semiconductor chips. […] The agency noted that the slowdowns are expected to intensify into April onwards.”
Our neighbors to the south – the US
Quick updates on Canada’s largest trading partner, the USA. Exports to the US fell by 3.8%, and imports inched up to 5.2%.
Bottom line on the deficit
Canada’s trade deficit with countries other than the US was logged at $5.4 billion. Total imports increased by 7%, and exports fell 0.3%.
What about the June 2021 trade surplus?
Canada announced the largest trade surplus in almost 13, at $3.23 billion. Exports rose in 9 of the 11 tracked sector categories and in half services categories. However, the biggest jumps were mostly due to exporting of oil, automobiles, and auto parts, as indicated by Statistics Canada (these rose by 25.7%, which is massive!). This was very surprising, as most economic analysts suspected Canada to post a deficit of $0.68 billion in June.
Peter Hall, chief economist at Canada’s Export Development Agency told Yahoo Finance over the phone:
“This is a very pleasant surprise. International supply chains are becoming less encumbered and … fundamental underlying demand that has been with us all the way along is actually manifesting itself in growth.”
What about importing?
For now, reports on the imports for the summer of 2021 were not as exciting. While our trade surplus enjoyed a massive, historically significant boost, importing stayed relatively stagnant — even dipping in some scenarios.
Here are some excerpts from Statistics Canada on the topic:
“Removing the effects of price changes, real goods exports (export volumes) grew 7.0% in June, while goods import volumes fell by 2.2%. […] Imports declined in 7 of the 11 product categories and in 1 of the 4 services categories. Lower imports of consumer goods contributed the most to the overall decline in goods imports in June, falling by 3.7%. […] These declines were partially offset by higher imports of pharmaceutical and medicinal products as a result of higher imports of COVID-19 vaccines in this category.”
While these past few months were not as positive for the importing community, it’s still important to stay informed on the market’s movements, so you can make the best choices possible for your importing business. For help with navigating these changes, contact a customs broker.