MNI INTERVIEW: US Trade Fight No Problem For Canada Exports

By Greg Quinn

     OTTAWA (MNI) - Canadian exports to the United States are poised for further

gains after shipments surged to a record despite Donald Trump's threats to tear

up a trade agreement and keep tariffs on steel, Ross Prusakowski, principal

economist at Canada's trade finance bank, told MNI.

     The solid U.S. economy has boosted demand for Canadian-made products such

as automobiles and aircraft. "Despite all the global trade uncertainty that the

administration has in the U.S., the underlying macro data has been quite

strong," he said.

     Future export growth may be aided with Trump urging Congress to ratify a

replacement to the Nafta trade pact and resuming trade talks with China, he

said. Global trade may also benefit from the recent Asia-Pacific trade deal

known as CPTPP, another boost for Canada.

     "Into next year we are probably going to see stronger global growth because

we are going to see more certainty," he said. 

     Canada's trade surplus with the U.S. widened to C$5.9 billion in May from

C$4.4 billion in April, the largest since 2008. Exports to the U.S. rose 3.7% to

a record C$39.3 billion. Exports to the U.S. have climbed 8% over the last 12

months, even as Trump assailed Prime Minister Justin Trudeau and bragged he

could wipe out much of Canada's auto industry with the stroke of a pen.

     The overall international trade balance swung to a surplus of C$762 million

in May from an April deficit of C$1.1 billion, Statistics Canada reported

Wednesday. Economists had predicted the deficit would widen to C$1.7 billion.

     --RECORD DEFICITS 

     The May surplus is the biggest since November 2016, and before this report

Canada was on pace for one of its biggest year-to-date deficits on record.

     "It's a nice dramatic about face from kind of the early trade data we were

seeing this year, and we actually think it may persist over the next few

months," Prusakowski said in an interview Wednesday.

     Concerns over escalating trade wars globally are one reason Bank of Canada

Governor Stephen Poloz shifted to a neutral stance this year after a string of

interest-rate increases. With trade adding to growth after years of

disappointments, it's another reason along with strong consumer spending to

resist pressure to match any Fed rate cut. 

     While Canada like the U.S. is embroiled in diplomatic and trade tensions

with China, it's much less significant. Canada ships almost 75% of its exports

to the U.S., and just 4% to China. 

     That makes the final work of ratifying a replacement to the Nafta pact

between the U.S., Canada and Mexico more significant than Trump's call for the

Fed to cut rates to boost growth. 

     EDC's surveys of exporters had already shown more confidence that Canada

and the U.S. would wrap up a trade deal, Prusakowski said.

     "That is providing more certainty and will definitely increase investment

decisions and people putting money on the table," he said.

--MNI Ottawa Bureau; +1 613-314-9647; email: greg.quinn@marketnews.com

[TOPICS: MACDS$,M$C$$$,MI$$$$,MX$$$$]