Canada racks up record trade deficit, but exports rebound

Canada racks up record trade deficit, but exports rebound

Canada racks up record trade deficit, but exports rebound

"Today's trade release was expected to be a ho-hum affair, but a surge in two-way trade completely changed that story", CIBC economist Royce Mendes wrote in a report.

The deficit narrowed to $25.9 billion from $29.3 billion, figures from the United States commerce department showed today.

Statistics Canada said on Thursday that the deficit hit C$4.14 billion ($3.21 billion) in March, much higher than the C$2.24 billion shortfall predicted by analysts in a Reuters poll.

America and China are engaged in a tit-for-tat dispute over import tariffs, which has sparked volatility in markets since the scrap began in March.

Trump announced new tariffs in March of up to 25 per cent on steel imports and 10 per cent on aluminum imports, and he later granted temporary exemptions to close trade partners, such as Canada, Mexico, Argentina, Brazil and the EU.

Exports of aircraft and other transportation equipment and parts rose 24.3 per cent in March to $2.3 billion, while farm, fishing and intermediate food products increased 14.7 per cent to $2.8 billion.

Data on global trade can be volatile from month to month, and the figures weren't adjusted for inflation.

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Economists who critique the significance of bilateral deficits nonetheless agree that large sustained overall trade deficits can suppress demand and slow economic growth. Gross domestic product grew a respectable 2.3% in the first quarter of 2018. The country-level data weren't adjusted for seasonality and excluded services.

So too were higher exports to Britain (unwrought gold), South Korea (aircraft) and Japan (copper and coal).

Exports also showed broad strength, with nine of 11 sectors rising.

Meanwhile, gains in imports of computer equipment (up 13 per cent), medium and heavy vehicles (up 9 per cent), and industrial machinery and equipment (up 3 per cent) suggested a solid pick-up in business investment. "They're buying beans in Canada, in Brazil, mostly Brazil, but very deliberately not buying anything from the U.S".

Imports of goods and services fell 1.8 per cent to US$257.5 billion, in part as the boost from royalties and broadcast licence fees related to the Winter Olympics faded.

Exports to the United States rose 1.2 percent while imports increased by 3.1 percent. After improving from 2011 to 2016, but worsening in 2017, the NAFTA first-quarter 2018 goods deficit is up slightly relative to the first quarter of 2017 - an increase from $49.1 billion to $49.6 billion. Crude oil imports dropped by US$0.5 billion in March.

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