Trade Deficit Narrows as B.C. Port Strike Takes a Bite Out of Imports

Canadian Economics

  • Canada’s merchandise imports decreased by 5.4 per cent (month-on-month) in July. Meanwhile, exports rose by 0.7 per cent. Canada’s merchandise trade deficit narrowed from a revised $4.9 billion in June to $987 million in July.
  • Total exports increased by 0.7 per cent in July, rising to $60.4 billion. Exports of aircraft and other transportation equipment and parts increased 23.4 per cent in July to reach a record high of $3.2 billion. After four consecutive months of decline, exports of farm, fishing and intermediate food products increased 9.7 per cent. Exports of canola more than doubled—mainly due to higher canola exports to China and Mexico. Meanwhile, exports of metals and non-metallic mineral products fell 8.6 per cent in July. Exports leaving British Columbia marine ports decreased in July but were offset by increases in products less affected by the strike.
  • Total imports fell by 5.4 per cent to $61.4 billion. The port strike significantly affected activity at British Columbia marine terminals. On a balance-of-payments basis, there were widespread declines in imports from countries such as China, Taiwan, South Korea, Peru, and Japan. Imports of goods that usually arrive through British Columbia marine ports were down: imports of consumer goods declined 4.9 per cent, while imports of industrial machinery, equipment and parts were down 6.1 per cent. Another factor behind the decline in July was imports of metal and non-metallic mineral products, which were down 25.3 per cent.
  • Imports from the United States decreased by 0.6 per cent, while exports rose by 1.5 per cent. As a result, the merchandise trade surplus with the United States went from $6.4 billion in June to $7.4 billion in July.

Key Insights

Global economic growth is waning. In the second quarter of 2023, growth in Canadian imports (0.5 per cent) exceeded growth in Canadian exports (0.1 per cent). At the same time, growth in Canadian real household spending decelerated to 0.1 per cent. Higher interest rates are beginning to take a toll on demand. Looking outside of Canada, the situation in Europe is worrisome. The Eurozone officially entered a technical recession in the first quarter of 2023, and the inflation rate remains significantly higher than that of Canada and the U.S. China’s economic challenges, marked by its property market slump and deflation, add an extra layer of uncertainty. If economic conditions persist in these markets, they could potentially have adverse effects on Canadian exports. However, it is not all doom and gloom. The U.S. economy has proven to be resilient in recent months, with real GDP expanding at an annual rate of 2.1 per cent in the second quarter of 2023, which is good news for Canadian trade.

Continued geopolitical tensions will likely shape the global economic landscape. The global economy, especially international trade, faces increased ambiguity stemming from frictions between the United States and China, alongside Russia’s ongoing invasion of Ukraine. Additionally, BRICS nations are actively striving to reduce their reliance on the U.S. dollar and advance their individual economic interests. Further complicating matters, Saudi Arabia has extended its voluntary oil supply cuts through to the end of the year. On a brighter note, the Association of Southeast Asian Nations gears up to make Canada its latest strategic partner—which will enhance Canada’s status within the Indo–Pacific region and hopefully give Canadian exports a boost over the medium term.

For an overview of our three-year international trade outlook, please consult the issue briefing.