MNI: Canada-U.S. Trade Surplus Off Record As Stockpiling Fades

Canada's merchandise trade surplus with the U.S. tumbled from a record high in February on signs that American firms slowed the pace of stockpiling to get ahead of threatened tariffs.

The bilateral surplus narrowed to CAD10.6 billion from January's record CAD13.7 billion, Statistics Canada said Thursday. Canada's global trade balance swung to a deficit of CAD1.5 billion in February from a prior surplus of CAD3.1 billion. That's much weaker than an MNI consensus for a CAD3.2 billion surplus, though StatsCan said some of the figures are based on estimates because customs data collection is being overhauled. 

Export and import figures showed a similar pattern, with shipments to the U.S. falling 3.6% from a record high after three prior increases. Canada's total exports fell 5.5% in February led by energy and autos, while imports climbed 0.8%. Total exports had climbed 16% from September to January, with some gains in line with products like autos and lumber that Donald Trump was moving to slap with big tariffs. StatsCan's report said "the strong volatility in recent months occurred amid threats by the United States to impose tariffs on Canadian goods."

President Trump on Wednesday imposed major tariffs across much of the globe and while Canada appeared not to receive big new penalties he kept in place some earlier announcements for levies of 25% on most products from north of the border and 10% on oil and potash. Experts have told MNI those tariffs leave Canada at risk of recession and create potential for the BOC to add a few more reductions to its seven interest-rate cuts since June. Canada sends three-quarters of its exports to the U.S. and officials have said perhaps a million jobs are at risk in a nation of about 40 million people.

Trump has said tariffs on Canada are justified by illicit flows of migrants and drugs, though official figures from both countries show Canada makes up perhaps less than 1% of those flows. Canada’s surplus in merchandise trade also masks the country’s frequent deficit in services often linked to tourist trips. Most of Canada’s U.S. surplus is also from goods such as crude oil, natural gas, uranium and critical minerals, which American officials have sought out in response to geopolitical threats and are tied to global benchmark prices, while Trump says Canada is manipulating trade. 

Prime Minister Mark Carney says Canada can cushion the blow from developing new markets, but StatsCan reported the trade deficit with countries other than the U.S. reached a record CAD12.1 billion in February.