Quick take

Trade Surplus Narrows

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  • Canada's total exports rose 2.8 per cent while imports followed a similar trend rising by 3.9 per cent in February. The trade surplus narrowed from $3.1 billion in January to $2.7 billion in February.
  • Exports increased 2.8 per cent to a record $58.7 billion. Exports of energy products rose 7.8 per cent to a record $15.4 billion. Energy products accounted for 26.2 per cent of total exports in February, an increase of more than six percentage points from the share of 19.7 per cent noted in February 2021. This was, however, primarily driven by higher energy prices.
  • Total imports rose 3.9 per cent to $56.1 billion in February. This monthly increase offsets almost half of the sharp decline (-7.5 per cent) observed in January. Imports of metal and non-metallic products saw the most significant gain (+14.3 per cent). Ambiguity around the future supply of metals from Russia may have contributed to the large gains witnessed this month.
  • Exports to the United States rose 1.3 per cent in February, while imports edged down 0.1 per cent. Consequently, Canada's trade surplus with the United States widened from $9.7 billion in January to $10.3 billion in February. This was the largest trade surplus with the United States since December 2005.

Key Insights:

  • No surprises. We expected a noticeable disruption to trade numbers in February. Some border crossings between Canada and the United States were blocked by protesters, inhibiting the regular movement of goods between the two countries. Although exports and imports via these border crossings were affected in February, this shock was not prevalent. The blocked border crossings appear to have had little impact on aggregate trade values. We should see a rebound in the numbers in March.
  • Russia’s invasion of Ukraine remains a concern. The impact of conflict will be felt through pressures on global supply chains and higher energy and commodity prices. Russia and Ukraine are significant wheat exporters, but the conflict can soon create grain shortages, pushing prices higher. Meanwhile, Ukraine supplies a considerable share of the worlds’ supply of neon, a critical input in the manufacturing of semiconductors. Neon shortages could see supply chain challenges resurface, particularly in the car manufacturing industry, a vital component of Canadas’ trade balance. Lastly, a prolonged conflict will likely impact or delay many aspects of Canada’s new or ongoing trade initiatives with Ukraine, including the modernization of the Canada Ukraine Free Trade Agreement.
  • Rising pump prices have been the most immediate and evident signal of the conflict due to Russia’s large share of global oil production. Still, while Canada used to benefit from solid oil and gas investments in periods of high prices in the past, this is unlikely to be the case this time around due to uncertainty about the future of the country's oil and gas sector and the lack of investment in new capacity. Due to the looming supply shock, the farming sector will also see disruptions, with Canadian producers likely to see solid demand for grains and oilseeds. However, with seeds already ordered and crop rotations planned, conditions may not be conducive for bumper crops this year. Additionally, sanctions also affect farmers by increasing fertilizer and transportation costs, thus creating a relatively limited supply of produce this year due to fixed inputs and higher prices faced by producers.

Russian Invasion of Ukraine: Access the latest insights

Momanyi Mokaya

Momanyi Mokaya

Research Associate

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