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Trade Deficit Narrows to $1.3 Billion in September

Canadian Economics

By: David Ristovski

  • Canada’s merchandise exports fell by 0.1 per cent (month-over-month) in September. Meanwhile, imports fell 0.4 per cent. Consequently, Canada’s merchandise trade deficit narrowed from $1.5 billion in August to $1.3 billion in September.
  • Exports fell to $63.8 billion in September, marking a third consecutive monthly decrease. Exports were down in 5 of 11 categories. Exports of metal and non-metallic mineral products (–5.4 per cent) and energy products (–2.6 per cent) contributed most to the decline. However, exports of forestry products and building and packaging materials (+5.3 per cent) increased in September on the back of higher exports of pulp and paper, partially offsetting the decline in total exports. Overall, lower prices were the main reason behind the monthly decline in nominal exports—in volume terms, total exports rose 1.4 per cent.
  • Imports edged down to $65.1 billion in September. Imports of metal and non-metallic mineral products decreased by 12.7 per cent and contributed most to the monthly drop. Other notable declines were recorded in electronic and electrical equipment and parts and in aircraft and other transportation equipment and parts. Meanwhile, imports of energy products (+13.6 per cent) partially offset the monthly decrease. In volume terms, imports were essentially unchanged in September.
  • Canadian exports to the U.S. were up 1.6 per cent. Meanwhile, imports from the United States rose 0.8 per cent. As a result, the merchandise trade surplus with the United States widened from $7.8 billion in August to $8.3 billion in September.

Key Insights

Exports of metal and non-metallic mineral products posted sharper declines than all other product categories. In September, a decline in exports of unwrought gold, silver, platinum group metals, and their alloys was the main driver behind the monthly decrease in this product category. Exports of unwrought gold, which make up a large portion of this category, fell by 15.4 per cent. This decline was due to lower exports of refined gold to the United Kingdom and reduced transfers of gold to the United States. Additionally, ongoing concerns about future oil demand led to a drop in crude oil prices for the second consecutive month, which was the primary factor behind the monthly decline in energy exports.

On the imports side, metal and non-metallic mineral products were the largest contributors to the overall monthly decline. After rising by 65.9 per cent in August, imports of unwrought gold, silver, and platinum group metals, and their alloys fell 46.4 per cent. Lower imports of unwrought gold from Switzerland and the United Kingdom were a main contributor to monthly decline. Since the beginning of the year, import values in this product category have fluctuated widely.

All eyes are on the U.S. Federal election. Today is election day in the U.S., and the policies of each party are under scrutiny. With both parties supporting protectionist policies against Canada, Canadian exporters face greater uncertainty going forward. The Republicans, in particular, have proposed a minimum 10 per cent tariff on all U.S. imports. If implemented, this could lead to retaliatory tariffs on U.S. goods entering Canada, potentially reigniting inflationary pressures.

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

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