International Trade

Merchandise Trade

January 2022

Canada’s Trade Balance Swings Back to Surplus, as Imports Fall Faster than Exports

HIGHLIGHTS

  • Canadian merchandise exports fell 0.2% to $56.6 billion in January, while merchandise imports tumbled 7.4% to $54.0 billion.
  • As a result, Canada posted a $2.6 billion trade surplus in January compared to a revised deficit of $1.6 billion in December.
  • After removing price effects, export and import volumes were down 4.6% and 8.5%, respectively.
  • The decrease in exports spanned 7 of 11 major commodity groups, led by lower exports of motor vehicles and parts. The declines were almost entirely offset by higher exports of energy products.
  • Exports to the United States rose 1.2% to $43.9 billion in January, while exports to the rest of the world fell 4.6% to $12.8 billion.
  • Widespread inflation boosted both exports and imports in January, as volumes were much weaker than the headline numbers. Rising energy prices, which were a key driver of this dynamic, are expected to continue to buoy Canada’s exports over the near term. That said, merchandise trade volumes are expected to remain weighed down by ongoing labour shortages and supply chain disruptions.

EXPORTS EDGE DOWN 0.2% IN JANUARY, WHILE IMPORTS TUMBLE 7.4%

Canadian merchandise exports fell 0.2% to $56.6 billion in January, while merchandise imports tumbled 7.4% to $54.0 billion. The story was even less encouraging after removing price effects. In volume terms, real exports and real imports were down 4.6% and 8.5%, respectively.

Widespread inflation boosted both exports and imports in January, as volumes were much weaker than the headline numbers. Rising energy prices, which were a key driver of this dynamic, are expected to continue to buoy Canada’s exports over the near term. That said, merchandise trade volumes are likely to remain weighed down by ongoing labour shortages and supply chain disruptions.

CANADA POSTS ITS SEVENTH TRADE SURPLUS IN EIGHT MONTHS

Canada posted a $2.6 billion trade surplus in January compared to a revised deficit of $1.6 billion in December, its seventh surplus in eight months. Breaking these data down, Canada’s trade surplus with the U.S. widened from $7.1 billion in December to $9.3 billion in January, while our trade deficit with the rest of the world narrowed from $8.6 billion to $6.7 billion.

DECREASE IN EXPORTS DRIVEN BY MOTOR VEHICLES AND PARTS

The decrease in exports spanned 7 of 11 product categories. Following three months of gains, exports of motor vehicles and parts fell 9.6% to $6.2 billion in January. Supply chain issues continued to affect the Canadian auto industry in January, forcing most auto manufacturers to reduce production.

Exports of aircraft and other transportation equipment and parts also had a tough month, decreasing 25.8% to $1.3 billion in January. The decline in aircraft exports was especially steep, down 57.3% to $284 million, the lowest level since January 2018.

On the positive side, these declines were almost entirely offset by higher exports of energy products, which increased 8.7% to $13.8 billion in January, following an 11.8% decline in December. Higher exports of natural gas contributed the most to the gain, thanks mainly to higher prices. Exports of coal also rose sharply in January after steep declines in the final two months of 2021, attributable to the BC floods that disrupted transportation lines on the west coast.

HIGHER EXPORTS TO THE U.S. MORE THAN OFFSET BY LOWER EXPORTS TO THE REST OF THE WORLD

Exports to the U.S. rose 1.2% to $43.9 billion in January, while exports to the rest of the world fell 4.6% to $12.8 billion. Among Canada’s major non-U.S. trading partners, exports to Japan, South Korea, Mexico, and China were up, while exports to the European Union and the United Kingdom were down. The decline in exports to the EU was mainly attributable to lower exports of aircraft to France.