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Canada Overcomes Trump's Metal Tariffs With Record Exports

06 August 2018

At the same time, it is hard to predict how exports may perform, given that the headwinds from trade also are a risk to the outlook for the global economy.

Economists surveyed by the Wall Street Journal had expected an even wider trade gap of $46.6 billion in June. This led to a 36.8 percent decline in exports of affected steel products to the U.S., following a spike in previous months.

A dip in auto exports and rising oil prices in June drove the increase in the gap between U.S. imports and exports, the Commerce Department reported Friday.

The country saw a 4.1 percent increase in exports compared with May, reaching 50.7 billion Canadian dollars (roughly 39 billion US dollars), due to spiked exports of energy products and aircraft.

"Exports will rise over the quarter, but strong domestic demand growth will lift imports more rapidly", he said in a client note.

Exports of transportation equipment and parts were up 18.9 per cent to a record $2.5 billion, with exports of business jets accounting for much of the increase.

Amid President Donald Trump's escalating trade dispute with China, the Commerce Department said the USA had a $32.5 billion trade deficit with the communist country in June.

The June deficit of C$626 million ($482 million) - the lowest since the C$485 shortfall recorded in January 2017 - was far smaller than the C$2.30 billion predicted by analysts in a Reuters poll.

As a result, the trade surplus with the United States grew to C$4.12 billion in June from C$3.33 billion in May. President Donald Trump's administration imposed tariffs of 25 per cent on steel and 10 per cent on aluminum in June, predicated on national security considerations; Prime Minister Justin Trudeau's government retaliated dollar-for-dollar on July 1.

And so as Yahoo Finance has written before, tax cuts could end up working against Trump's efforts to bring down the US trade deficit, which in 2017 totaled $570 billion.

Many economists believe the looming trade dispute with China may also have contributed to an out-of-season surge in USA soybean exports in the second quarter that could reverse going forward.

National Bank of Canada economist Kyle Dahms suggested that US tariff threats may be temporarily fuelling USA demand for some Canadian goods.

Trade actions could also limit GDP growth in the quarters ahead alongside this tax cut boost.

In the second quarter, the USA economy grew at an annualized rate of 4.1%, the fastest pace of growth since 2014.

The latest numbers add to the case for the Bank of Canada to raise rates again in the near-term, Nye said, adding that he expects the central bank to continue its gradual approach to increasing the interest rates.

Canada Overcomes Trump's Metal Tariffs With Record Exports