Canada’s merchandise trade balance tallied a $942 million deficit in October, registering in the red ink for the eighth consecutive month. The deficit narrowed from September’s $1.3 billion deficit.
Merchandise exports rose by 1.1% month-on-month (m/m) in October, partially reversing the past three months of declines. The highly volatile metallic and non-metallic minerals product group contributed to most of the trade gain (+10.6% m/m). Exports of consumer goods (+4.7% m/m) also provided an assist. Aside from that, 8 of 11 sectors registered declines on the month.
Total merchandise imports also increased, by 0.5% m/m in October, with the biggest gains coming from metal ores and non-metallic minerals (+46.1% m/m) and energy products (+6.2% m/m).
In volume terms, merchandise exports rose by 0.4% m/m and imports were up by 0.7% m/m.
Canada’s merchandise trade surplus with the United States narrowed to $6.2 billion in October from $7.9 billion the month prior.
Key Implications
Statistics Canada has cautioned that a new digital initiative will subject October’s data to heavy revisions, making this report tough to read. For what it’s worth, export volumes are tracking higher than imports putting the growth contribution to Q4 GDP in positive territory.
Trade data has taken on increased importance as President-elect Trump takes office in January. Our base case is that Canada largely avoids Trump’s blanket 25% tariff across all goods exports, but we acknowledge that any tariff policy levied against Canada will come with negative economic consequences. There may be signs that manufacturers and retailers are front-running potential tariffs, as total import and export volumes have risen modestly over the last three months, although it’s still too early to tell if this is the start of a trend.
