MNI:Record Canada-U.S. Trade Surplus On Pre-Tariff Stockpiling
MNI (OTTAWA) - Canada's merchandise trade surplus with the U.S. was a record CAD14.4 billion in January as customers stockpiled autos and industrial gear ahead of Donald Trump's tariffs, a boost likely to fade with this week's announcement those trade penalties are coming into force.
The surplus with the U.S. widened from December's CAD12.3 billion as exports rose 7.5% to a record CAD58.2 billion, Statistics Canada said Thursday. That was faster than the 4.7% gain for imports.
Canada sends three-quarters of total exports to the U.S. and almost all of its auto shipments. Total exports of cars and light trucks jumped 26% since October before Trump's election win, to CAD6.1 billion from CAD4.8 billion. Industrial gear gained 23% in that time or to CAD5 billion from CAD4.1 billion.
"The announcement of tariffs may influence trading patterns and represent an incentive for importers to increase their shipments prior to implementation to avoid additional costs," the StatsCan report said. Canada's weaker dollar also likely provided another boost to exports, depreciating another 1% in January to mark the fourth straight decline, the report said.
Gains in trade with the U.S. boosted Canada's merchandise trade surplus with the world to CAD4 billion from CAD1.7 billion, as both imports and exports climbed to record highs. It was the widest trade surplus since May 2022. Energy exports also climbed 4.8% in January led by higher oil and natural gas prices.
The wider trade surplus follows two years where the balance had narrowed, clashing with Trump's claims Canada was ringing up hundreds of billions of dollars a year in "subsidies." The U.S. imposed wide-ranging tariffs this week to usher in the biggest trade war since the 1930s with its longstanding economic and military ally. Canada is retaliating though not dollar-for-dollar yet and says any tariffs are unjustified after Trump himself renewed a North American trade pact in his first term.
Prime Minister Justin Trudeau said this week that Trump's moves aren't really economic and he is using false claims of massive shipments of illicit drugs and migrants to wreck Canada's economy and move towards annexation. Official figures from Canada and the U.S. show less than 1% of illicit migration or fentanyl enters from the north.
The prospect of a trade war added even more pressure on Prime Minister Justin Trudeau to announce his resignation and he plans to leave after Sunday's leadership race where former BOC Governor Mark Carney is expected to replace him as Liberal leader.
Over most of the last decade Canada has reported a global trade deficit, partly because of dwindling auto exports and lower prices for energy shipments. China and Mexico have also grown as sources of U.S. imports.
Since Canada and the U.S. signed a free trade deal with Ronald Regan in 1988 there have also been phases of big trade surpluses as the U.S. economy grew faster and Canada’s dollar weakened.
A good chunk of Canada’s U.S. exports are goods such as crude oil, natural gas, uranium and critical minerals, which American officials have sought out in response to potential geopolitical threats. Many Detroit-area auto factories also rely on seamless shipments of parts from suppliers in the neighboring province of Ontario. The premier of that province has said he will cut off electricity shipments to states like Michigan and New York if the tariffs persist.
Trump has described U.S. trade deficit with Canada as a $USD200 billion annual subsidy. Most economists would describe it as more tied to higher American incomes, and the deficit is a sliver of U.S. gross domestic product.
The two countries have a long history of shifting support for free trade. Canada needed a hotly contested election before Brian Mulroney won a mandate to ink a free trade deal with Ronald Reagan, and Canada was founded in 1867 partly on a deal to create a strong domestic industrial economy in resistance to potential U.S. domination. Fights over softwood lumber have gone on for more than a century.