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Trade Deficit Widens to $1.9 Billion in May

Canadian Economics

By: David Ristovski

  • Canada’s merchandise exports were down 2.6 per cent (month-over-month) in May. Meanwhile, imports fell by 1.6 per cent. As a result, Canada’s merchandise trade deficit widened from $1.3 billion in April to $1.9 billion in May.
  • Exports fell to $62.4 billion in May—the lowest level since July 2023. They were down in 8 of 11 categories with exports of metal and non-metallic mineral products (down 7.0 per cent) contributing most to the monthly decline. On the positive note, exports of motor vehicles and parts were up 3.6 per cent in May on the back of higher sales of Canadian-manufactured light trucks to the United States. In volume terms, total exports were down 1.7 per cent.
  • Imports declined to $64.3 billion in May. Imports of metal and non-metallic mineral products fell 10.0 per cent and contributed most to the monthly drop. Other notable declines were recorded in imports of motor vehicles (down 4.4 per cent), and energy products (down 11.6 per cent). Overall, declines were observed in 6 of 11 product sections. In volume terms, imports fell by 1.3 per cent.
  • Canadian exports to the U.S. edged up 0.8 per cent. Meanwhile, imports from the United States declined by 1.7 per cent. As a result, the merchandise trade surplus with the United States widened from $7.1 billion in April to $8.2 billion in May.

Insights

Exports of metal and non-metallic mineral products posted a sharper decline than all other product categories. Specifically, exports of unwrought gold, silver, platinum group metals, and their alloys decreased by 17.1 percent. The value of unwrought gold exports has shown significant monthly fluctuations due to changes in volumes and prices. The decline in May was driven by lower export volumes, particularly to the United Kingdom.

On the import side, declines in motor vehicles and parts, as well as metal and non-metallic mineral products, were central to the monthly decline. Imports of passenger cars and light trucks fell by 7.1 percent, largely due to reduced imports of sport utility vehicles and other light trucks from the United States. Additionally, imports of unwrought gold, silver, and platinum group metals and their alloys plummeted by 45.9 percent. However, March and April saw strong increases in gold purchases abroad, with May marking a return to more typical values.

Exports are expected to outpace imports this year. Although that dynamic will come behind both moderate export and import activity. Export growth will be contained by cooler growth in the U.S. economy, with the underlying weakness in exports felt mostly in non-energy exports. Meanwhile, import growth will lag that of exports. Later in 2024, the outcome of the U.S. election may begin to put a dent in trade prospects, as both major parties are in favour of greater protectionism against Canada.

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

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