Trade deficit shrinks to $4.9B in July as energy, vehicle exports rise
Canada’s trade deficit narrowed in July as overall exports rose, driven by outbound shipments of crude oil and passenger cars to its biggest trading partner, the United States. According to Statistics Canada, the merchandise trade deficit in July was $4.94 billion, smaller than the previous month but higher than the same period last year.
In July, overall exports increased by 0.9% to $61.86 billion, while imports slowed by 0.7% to $66.8 billion. Analysts had forecasted a trade deficit of $4.75 billion for July. This marks the sixth consecutive trade deficit since President Trump imposed tariffs on Canada, but the deficit has been improving from the all-time record observed in April.
The threats and tariffs imposed by President Trump have disrupted supply chains and forced businesses to seek markets elsewhere, causing a trade imbalance between the two countries. However, exports to the U.S. have been on the rise for the past three months.
Canada exported more crude oil and passenger cars to the U.S. in July, resulting in a 5% increase in exports. Energy products saw a 4.2% increase in exports, while motor vehicles and parts increased by 6.6%. On the other hand, exports of aluminum, which faces a 50% tariff from the U.S., declined by more than 30% in July.
Exports to countries other than the United States decreased by 8.6% in July, while imports from countries excluding the U.S. increased by 1.3%. The Canadian dollar was trading down after the release of the trade data, and bond yields on government bonds improved slightly.
With recent GDP data showing a contraction of 1.6%, money markets are now predicting a rate cut by the central bank on September 17. There is a nearly 70% chance of a rate cut, reflecting concerns about the state of the economy.
Overall, Canada’s trade deficit is showing signs of improvement, with exports to the U.S. increasing and a potential rate cut on the horizon. The impact of tariffs and trade tensions with the U.S. continue to be key factors influencing Canada’s trade balance.
