Quick take

Trade Balance Slowly Bouncing Back

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  • Canada’s total exports edged down 0.2 per cent while imports fell by 7.4 per cent in January. As a result, after posting its first deficit in seven months in December, Canada’s merchandise trade balance returned to a surplus position. It went from a $1.6 billion deficit in December to a $2.6 billion surplus in January 2022.
  • Imports of motor vehicles and parts declined 13.9 per cent in January, more than offsetting the 6.8 per cent increase observed in December 2021. Imports of passenger cars and light trucks also plunged 12.4 per cent, in part because of reduced movement from the United States.
  • Following three months of gains, exports of motor vehicles and parts fell 9.6 per cent in January. While exports usually bounce back in January after downtime during the December holidays, this bounce back did not take place in 2022, resulting in a sharp seasonally adjusted decline in exports of passenger cars and light trucks (–15.0 per cent).
  • Total imports from the United States were down 4.7 per cent while exports rose by 1.2 per cent. As a result, Canada’s trade surplus with the United States widened from $7.1 billion in December 2021 to $9.3 billion in January 2022, the largest trade surplus since July 2008.

Key insights:

  • We expect noticeable disruption to trade numbers in February. At the end of January and in February 2022, some border crossings between Canada and the United States were blocked by protesters, preventing the normal flow of goods between the two countries. In 2021 the Ambassador Bridge was associated with up to 24 per cent of Canada’s merchandise trade activity by road. The Pacific Highway, Coutts and Emerson crossings account for another 12 per cent. Although exports and imports via these border crossings will be affected in February on aggregate, this could be mitigated by other modes of transportation or the use of alternative crossing points.
  • The Russia Ukraine conflict is an increasing worry globally, and Canada has responded to the situation in Ukraine by imposing further restrictions on trade with Russia. However, the effect on Canada’s direct trade with both nations will be minimal. In 2021, imports from Russia totaled $2.1 billion in 2021, making up 0.3 per cent of all Canadian imports, while exports to Russia on a customs basis amounted to $657 million, representing 0.1 per cent of Canada’s total merchandise exports to the world. Regarding Canadian trade with Ukraine, imports and exports posted values around the $220 million mark in 2021. Therefore, although Canada might not be drastically affected, the repercussions may ripple through important trade partners, indirectly affecting Canada’s trade outlook.
  • From a commodity perspective, rising pump prices have been the most immediate and evident beneficiary of the conflict due to Russia’s share of global production. With the dynamic situation and no clear end in sight, we should expect much higher crude prices this year with increased volatility in the near term. However, with reduced demand for Russia’s oil in the global market, Canada’s exports of refined petroleum energy products could see a jump in the near future, with the resulting drive on economic growth remaining uncertain. The farm sector will also see disruptions, with Canadian producers likely to see solid demand for grains and oilseeds owing to the looming supply shock. Additionally, metals markets are seeing big price adjustments in copper, palladium, nickel, and aluminum, etc.

Russian Invasion of Ukraine: Access the latest insights

Momanyi Mokaya

Momanyi Mokaya

Research Associate

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