Canada’s trade balance moved into a $2.7 billion surplus in April, widening from $1.8 billion the prior month.
Exports in April rose by 1.6% month-on-month (m/m) following sturdy gains over the last two months. Higher oil prices pushed energy exports up 9.7% m/m, led by crude oil. Exports of motor vehicles and parts gained handsomely in April (+5.9% m/m) following the ongoing recovery in Canadian auto production. Solid gains in wheat (+31.9% m/m) and industrial machinery (+9.6%) were offset by a sharp 17.5% m/m drop in exports of metal and non-metallic mineral products. In total, 9 of 11 product categories registered a gain.
Goods imports nudged higher by 0.3% m/m in April, reversing March’s loss, with 6 of 11 subsectors booking a gain. Industrial, chemical, plastic and rubber imports (+16.9% m/m) and imports of electronics and electrical equipment (+13.2% m/m) contributed most to the monthly gain.
In volume terms, exports increased up by 3.0% m/m while imports edged higher by 0.4% m/m.
Canada’s merchandise trade surplus with the United States widened from $7.8 billion in March to $9.5 billion in Exports. Exports to non-U.S. destinations moderated in April, falling by 4.8% m/m.
Key Implications
With improving exports volumes in April, Q2 trade data point to a reversal in trade dynamics, suggesting net trade is poised to shift from a material drag in Q1 to a modest tailwind in Q2. That said, with flows still heavily influenced by volatile components (notably oil, gold and autos), trade contributions are likely to remain choppy and through the remainder of the year.
The July 1st CUSMA review deadline is fast approaching, but a timely renewal looks unlikely as negotiations have yet to gain steam. Importantly, missing the deadline does not imply a collapse of the agreement: CUSMA remains in force and would shift into rolling annual reviews, raising the spectre of prolonged negotiations and ongoing trade uncertainty.
