Arthur J. Villasanta – Fourth Estate Contributor
Ottawa, Canada (4E) – Canadian exports soared to a record high US$482 million in June despite the adverse effects of U.S. tariffs on Canadian-made aluminum and steel imported into the United States.
The huge June export total also slashed Canada’s trade deficit to its lowest in 17 months, and is the lowest since the US$373 million deficit posted in January 2017, according to data from Statistics Canada. The June deficit was far smaller than the US$1.8 billion predicted by analysts.
The United States received 73 percent of all Canadian goods exports in June. Canadian exports rose 2.5 percent to a new record while imports inched upwards by 0.3 percent. As a result, the trade surplus with the U.S. grew to US$3.17 billion in June from US$2.56 billion in May.
The cheery data obscured a 36.8 percent drop in steel exports to the United States after Donald Trump imposed a 25 percent tariff at the end of May. Canada is the largest single supplier of steel to the United States.
The unexpectedly strong overall performance boosted market expectations that the Bank of Canada (BoC), the central bank, will hike interest rates on Sept. 5. BoC has raised rates four times since the middle of last 2017 as the Canadian economy has strengthened.
Canadian exports jumped 4.1 percent from May to US$39 billion on more shipments of energy products and aircraft, in particular business jets. The improvement was the largest since a 4.8 percent increase in November 2016.
Second quarter exports increased by 6.0 percent from the first, the largest such gain in 10 years. Exports grew 2.1 percent in terms of volume.
“The data will have markets adding a bit of weight to the odds for a September hike, or at a minimum, gaining even more confidence about one in October,” said Avery Shenfeld, chief economist at CIBC Economics.
The value of Canadian steel shipments fell to US$413 million in June from May. On the pther hand, exports of aluminum to the United States subject to a 10 percent tariff dropped 7.0 percent to US$655 million.
“The fact that we can have such a strong print with the metals tariffs dragging on things illustrates they are going to have a marginal impact on the Canadian economy,” said Andrew Kelvin, senior rates strategist at TD Securities.
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