Canada’s economy ran a trade deficit for a second straight month in November. November’s deficit was driven by a drop in exports, including shipments to the US. Canada’s trade activity has been closely monitored as the US imposed significant tariffs on key industries in Canada. Now, the Canada-United States-Mexico Agreement (CUSMA) is up for renewal, which is adding to uncertainty about Canada’s trade ties with the US.

• Canada’s trade deficit ballooned to $2.2 billion in November from $400 million in October. This is Canada’s second straight deficit after posting a small surplus in September. Exports declined at a faster pace than imports in November, widening the trade deficit.
• Exports declined by 2.8% in November over the previous month to $63.9 billion. Lower exports were concentrated in just a few industries. Overall, exports rose in eight of 11 industries. The biggest declines were seen for metal and non-metal mineral products and motor vehicles and parts. Exports to the US continued to decline.
• Imports were also lower, dropping by 0.1% to $66.1 billion. There was a decline in purchases of energy products and motor vehicles and parts.
• US trade data in November was also released yesterday. Like Canada, the US trade deficit widened over the month. Exports fell from the record high reached in October. Conversely, imports increased.

The importance of trade to Canada’s economy cannot be understated. The Canadian government is trying to diversify trade to offset the losses from the US. This has been evident in China resuming canola purchases from Canada and Canada improving trade ties with India. The Canadian Prime Minister and provincial Premiers met over the past two days to talk about the country’s trade with the US and how to approach the review of CUSMA. On Wednesday, the Bank of Canada held its policy interest rate steady but noted that risks to Canada’s economic activity persist, including trade and geopolitical tensions.

If you would like to discuss this economic and market update or have questions about your finances and investments, please feel free to contact me anytime.