International Trade

Merchandise Trade

JULY 2021

Trade Surplus Narrows in July as Imports Outpace Exports

HIGHLIGHTS

  • Canadian merchandise exports increased 0.6% to $53.7 billion in July, while merchandise imports jumped 4.2% to a record high of $53.0 billion.
  • Canada’s merchandise trade surplus narrowed from $2.6 billion in June to $778 million in July.
  • In volume terms, real exports were down 0.3%, while real imports were up 1.9%.
  • The increase in exports spanned 7 of 11 major commodity groups, with motor vehicle and parts contributing the most to the growth.
  • Exports to the U.S. rose 3.6% to a record high of $40.8 billion in July, while exports to the rest of the world fell 7.6% to $12.9 billion.
  • The drop in real exports in July provided more evidence that the Canadian economy got off to a slow start in the third quarter, following a decline in the previous quarter. While the economic outlook on balance remains positive, Canada’s manufacturers and exporters remain vulnerable to ongoing supply chain disruptions and the hit to demand from the spread of the Delta variant of the coronavirus.

MERCHANDISE EXPORTS UP FOR SECOND STRAIGHT MONTH IN JULY

Canadian merchandise exports increased 0.6% to $53.7 billion in July, building on the 7.5% advance in June. Merchandise imports rose 4.2% to a record high of $53.0 billion, the strongest gain in four months. In volume terms, the picture was less rosy: real exports were down 0.3%, while real imports were up 1.9%.

The drop in real exports in July provided more evidence that the Canadian economy got off to a slow start in the third quarter, following a decline in the previous quarter. While the economic outlook on balance remains positive, Canada’s manufacturers and exporters remain vulnerable to ongoing supply chain disruptions and the hit to demand from the spread of the Delta variant of the coronavirus.

TRADE SURPLUS NARROWS

Canada’s merchandise trade balance remained in a surplus position, but it narrowed from $2.6 billion in June to $778 million in July. Canada has posted trade surpluses in five of the first seven months of 2021, the best run since 2014. Breaking the July numbers down, our trade surplus with the U.S. narrowed from $7.9 billion in June to $6.7 billion in July, while Canada’s trade deficit with the rest of the world widened from $5.3 billion to $5.9 billion over the same period.

INCREASE IN EXPORTS DRIVEN BY MOTOR VEHICLE AND PARTS

The increase in exports spanned 7 of 11 major commodity groups. Exports of motor vehicles and parts rose 6.4% to $6.3 billion in July, building on the 16.0% gain in June. As noted by Statistics Canada, the effects of temporary summer stoppages at assembly plants in Canada were less pronounced this year compared with the years preceding the pandemic, as companies tried to make up for lower production in early months due to the ongoing global semiconductor shortage.

Exports of energy products climbed 1.9% to $11.0 billion, the third consecutive monthly increase. Exports of both crude oil and natural gas posted large gains, thanks mainly to higher prices. Several other sectors also contributed to the growth in total exports in July, including electronic and electrical equipment and parts (+7.9%); aircraft and other transportation equipment and parts (+8.3%); basic and industrial chemical, plastic and rubber products (+4.5%); industrial machinery, equipment and parts (+4.5%); and consumer goods (+2.0%).

Unfortunately, these gains were almost entirely offset by a 12.7% decrease in exports of forestry products and building and packaging materials. This decline was attributable to lower exports of lumber and other sawmill products, which was entirely driven by a fall in prices.

EXPORTS TO THE U.S. SET RECORD FOR SECOND STRAIGHT MONTH

Canada’s exports to the U.S. hit a record high for the second straight month, rising 3.6% to $40.8 billion. The gain was attributable to higher exports of motor vehicle and parts. The increase in exports to the U.S. was largely offset by lower exports to the rest of the world, which were down 7.6% to $12.9 billion. Among Canada’s major non-U.S. trading partners, exports to the U.K., Japan, Mexico, and South Korea were up on the month, while exports to China and the European Union were down. The sharp drop in exports to China was largely due to lower exports of copper ore, canola, and iron ore.