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The Quick Take: August 3, 2018

Exports Performed Well in June Despite Launch of Tariffs

Daniel Fields
Economist
National Forecast

“Canada’s merchandise trade numbers for June were generally positive, despite the Trump administration’s June 1 announcement of new tariffs on steel and aluminum imports. Solid export numbers were supported by increased trade with non-U.S. trading partners.”

The second quarter of 2018 ended with a solid performance, as June saw exports rise by 4.1 per cent while imports fell 0.2 per cent.

As a result, the trade deficit fell from $2.7 billion in May to $626 million, bringing the trade balance to its smallest deficit since January 2017.

Interestingly, while energy was the biggest contributor to the solid increase in exports (increasing 7.1 per cent), non-energy exports also performed well increasing 3.4 per cent. This is welcome news as we saw a relatively poor performance outside of the energy sector in the first half of the year.

After soaring in recent months as companies sought to avoid incoming tariffs, exports of steel and aluminum fell in June. Steel exports, which are now subject to a 25 per cent tariff, declined substantially by 36.8 per cent in the month and are now 14.3 per cent below the same period last year. While exports of aluminum—which are subject to a 10 per cent tariff—declined 7 per cent in June, they are still 10.2 per cent higher than the same period last year.

As the contentious NAFTA negotiations continue, Canada is looking to non-U.S. trading partners to diversify growth. While trade with countries outside of America still make up only 27 per cent of Canada’s export profile, growth with non-U.S. countries nearly doubled export growth to the U.S. in the last 12 months.

In June exports to the U.S. increased by 2.5 per cent compared to an increase in exports to non-U.S. countries of 8.7 per cent.

Adjusting for the effect of prices, export volumes increased by 2 per cent in June based on strong growth in industrial machinery, metal ores, and aircraft.

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