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Lower Imports Drives Trade Deficit to a Surplus

Canadian Economics

By: David Ristovski

  • Canada’s merchandise exports were down 1.7 per cent (month-over-month) in January. Meanwhile, imports declined by 3.8 per cent. As a result, Canada’s merchandise trade balance moved from a deficit of $863 million in December to a surplus of $496 million in January.
  • Exports fell to $62.3 billion, marking the third consecutive monthly decline. Exports of metal and non-metallic mineral products fell by 6.2 per cent and were the largest contributor to the monthly decline. Exports of aircraft and other transportation equipment and parts fell 13.9 per cent in January. Decreases were observed in eight of eleven product sections. In volume terms, exports were down 1.8 per cent.
  • Imports fell to $61.8 billion in January to the lowest level since February 2022. Notable declines were recorded in imports of consumer goods (-7.1 per cent), motor vehicles and parts (-5.2 per cent), and metal and non-metallic mineral products (-9.2 per cent). Overall, seven of eleven product sections were down in January. In volume terms, imports were down 4.1 per cent.
  • Canadian exports to the U.S. were down 1.0 per cent—falling for a fourth consecutive month. Meanwhile, imports from the United States decreased by 1.7 per cent. As a result, the merchandise trade surplus with the United States widened from $8.6 billion in December to $8.8 billion in January.

Key Insights

Exports supported the economy in the final quarter of 2023, but a weak start to the year is concerning. Exports rose by 1.4 per cent in the fourth quarter of 2023, primarily due to increased exports of crude oil and crude bitumen, reflecting ongoing production in Alberta. Conversely, imports declined by 0.4 per cent in Q4 2023, driven by lower imports of intermediate metal products, motor vehicle engines and parts, and passenger cars and light trucks. Although January’s trade results showed a shift in the trade balance from a deficit to a surplus, a weak start to the year for exports is concerning.

There are many factors that could impact Canadian trade this year. The global economy is anticipated to moderate, with growth projected to slow to 2.4 per cent this year, which could dampen Canada’s export prospects. Additionally, China’s economic performance remains subdued, and concerns persist regarding the Euro Zone’s economic situation. Ongoing conflicts in Ukraine and the Middle East further contribute to global economic uncertainty. On the positive side, the U.S. economy has been resilient, and as Canada’s largest trading partner, provides upside to the outlook.

For a more detailed analysis of our trade outlook, check out our latest Canadian Five-Year Outlook.

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