Trucks loaded with shipping containers leave the Port of Montreal on May 17, 2021.Christinne Muschi/Reuters
Canada posted its ninth-consecutive trade deficit in November, but its trade surplus with the United States grew that month, highlighting a key economic dynamic that has political implications ahead of Donald Trump’s return to the White House later this month.
Canada’s total merchandise trade exports increased 2.2 per cent in November, while imports increased 1.8 per cent, narrowing the country’s trade deficit with the rest of the world to $323-million from a downwardly revised $544-million the month before, Statistics Canada reported Tuesday.
At the same time, the long-standing goods trade surplus with the United States increased to $8.2-billion from $6.6-billion in October, with exports to the U.S. up 6.8 per cent month-to-month and imports up 4.1 per cent.
That monthly trade surplus – the result of Canada exporting more to the United States than it imports – is on the small side, compared to the average in recent years. However, it may carry larger political significance than usual, given Mr. Trump’s complaints about the U.S. trade deficit with Canada and his threats of tariffs.
The president-elect has promised to slap 25-per-cent tariffs on Canadian imports if Ottawa does not address American concerns about border security. Mr. Trump has also complained about his country’s merchandise trade deficit with Canada, which has averaged a little over $100-billion annually for the past three years on around $1.1-trillion in annual two-way trade. The trade deficit is smaller when services are taken into account.
“We lose in trade deficits. We’re losing massive,” Mr. Trump said of trade with Canada in a news conference on Tuesday. “You know, they make 20 per cent of our cars. We don’t need that. I’d rather make them in Detroit. We don’t need their cars. We don’t need their lumber ... We don’t need their dairy products. We have more than they have. We don’t need anything.”
Canada’s trade-oriented economy relies heavily on access to the U.S. market. It’s the destination for around 75 per cent of Canadian exports, including $166-billion worth of oil and gas exports and $85-billion worth of vehicle and auto parts exports in 2023. High and broad-based tariffs could push Canada into a recession and stunt business investment.
“The outlook for Canadian trade in 2025 is cloudy at best,” Toronto-Dominion Bank economist Marc Ercolao wrote in a note to clients. “Our base case is that Canada largely avoids a full-scale implementation of Trump’s tariff plan, given our energy-heavy relationship with the U.S. – though we acknowledge that any tariff levied against Canada has negative consequences for economic growth.”
The increase in overall Canadian exports was broad-based in November, with metals and non-metallic ores up 10.5 per cent, industrial machinery and parts up 3.8 per cent and aircraft and transportation equipment up 6.7 per cent. Energy exports rose 2.2 per cent, with a 4.8-per-cent jump in crude oil exports on stronger prices.
Motor-vehicle exports, by contrast, contracted 1.2 per cent in November and remain considerably lower than a year ago.
Canada’s exports to the U.S. have been helped in recent months by a depreciation in the Canadian dollar against the U.S. dollar, which makes Canadian products more appealing to American buyers.
Exports may also be getting a boost as companies try to “front-run” potential tariffs by moving goods across the border pre-emptively. A survey of more than 300 Canadian companies in December, conducted by the organization Canadian Manufacturers & Exporters, found that about one-third are accelerating shipments to the U.S.
In volume terms, total exports were up 0.5 per cent in November.
“The third consecutive rise in export volumes in November provides further evidence that the economy was gaining momentum at the end of last year,” Stephen Brown, deputy chief North America economist at Capital Economics, wrote in a note to clients. “U.S. tariffs could cause the recovery to go into reverse this year, but that threat might provide some further support in the near term if U.S. importers try to front-run the tariffs.”
Merchandise exports to countries other than the U.S. decreased 10.3 per cent in November, driven by lower shipments of gold to Hong Kong and nickel to Norway. Canada’s trade deficit with countries other than the United States widened to $8.5-billion in November from $7.2-billion in October.
Service exports, meanwhile, contracted 0.2 per cent, leaving the services trade deficit at about $300-million, essentially unchanged from the previous month.