Canada has seen fluctuations in its international trade, particularly in the automotive sector, contributing to a trade surplus in July 2024 after several months of deficit. Canada’s overall trade balance with the world improved due to a combination of decreased imports and exports, particularly driven by challenges in the global auto industry and varied performance across other sectors.
The most significant factor influencing Canada’s merchandise trade in July 2024 was the decline in both imports and exports of motor vehicles and parts. The sector experienced a steep decline in imports, falling by 10.8%. The decrease in imports was largely attributable to passenger cars and light trucks, which dropped 18.7% after a record-breaking import surge earlier in the year. These figures reflect the end of a recovery period following production disruptions in late 2023 and early 2024, including supply chain issues, floods in the southern United States, and software outages at North American dealerships.
In addition to vehicles, imports of aircraft and other transportation equipment decreased by 17.2%, with aircraft imports plummeting by 43.4%, bringing them in line with the year’s monthly average. The decline in transportation equipment imports was further exacerbated by a 60.9% drop in imports of ships and railway equipment.
Conversely, imports of metal and non-metallic mineral products saw a notable increase, growing by 10.1%. This was driven by higher imports of non-ferrous metals, particularly copper from Sweden, and a significant rise in unwrought gold imports, partially offsetting the overall decline in imports.
Exports also witnessed a downturn, falling 0.4% overall, primarily due to a 5.4% drop in motor vehicles and parts exports. This marked the second consecutive month of decline for this sector. Passenger cars and light trucks exports fell 5.9%, reaching their lowest point since November 2022. The drop in export values is a result of reduced Canadian auto manufacturing production, coupled with a slowdown in U.S. manufacturing.
Exports of farm, fishing, and intermediate food products fell by 3.9%, with wheat and canola being the most affected. Canola exports in particular saw a significant decrease, dropping 25.6% for the month, reflecting the ongoing shift towards domestic processing for renewable energy inputs.
One of the more positive outcomes of the month was Canada’s growing trade surplus with the United States, which expanded to $11.3 billion, the highest level since October 2023. This was bolstered by a 1.9% increase in exports to the U.S. and a 3.3% decline in imports. The widening surplus was a result of stronger trade ties and favorable market conditions with its southern neighbor.
However, this improvement was tempered by a widening trade deficit with countries outside of the U.S. Exports to non-U.S. countries dropped by 7.8%, with significant declines in shipments to the United Kingdom (unwrought gold), India (crude oil, copper ores, coal), and Hong Kong (crude oil). Meanwhile, imports from non-U.S. countries grew modestly by 0.9%, particularly from Switzerland and the United Kingdom, but this was not enough to offset the export losses. As a result, the trade deficit with these countries increased from $9.2 billion in June to $10.6 billion in July.
Beyond the automotive sector, other industries experienced mixed results in July. For instance, metal and non-metallic mineral imports surged, driven by demand for copper and unwrought gold. On the other hand, the drop in aircraft and transportation equipment imports highlighted the volatility in global trade logistics and market demand.
The energy sector, while still robust, faced challenges with declines in crude oil exports to key partners like India and Hong Kong. Lower crude oil prices and weaker demand have contributed to this downturn. Meanwhile, Canada’s agricultural exports, particularly wheat and canola, continue to fluctuate due to shifts in domestic processing and changing market conditions.
In addition to merchandise trade, Canada’s trade in services remained relatively stable. Service exports were unchanged at $16.8 billion, while service imports grew by 0.6% to $18.4 billion. This stability in service trade contrasts with the volatility observed in goods trade, though the overall trade deficit in services contributed to the country’s broader trade balance.
Revisions to June’s trade figures showed a slight increase in imports, now recorded at a record $66.1 billion, while exports were adjusted downward to $65.9 billion. These revisions highlight the ongoing challenges in accurately predicting trade flows amid global economic uncertainties.
Looking ahead, the global trade environment continues to present a challenging landscape for Canadian exporters and importers alike. The automotive sector’s performance, influenced by North American production shifts, will remain a key area to watch, as will developments in the agricultural and energy sectors.
While Canada saw a return to a trade surplus, driven largely by strong ties with the United States, challenges remain in key sectors such as automotive and agriculture. As global economic conditions evolve, Canada’s trade strategies will likely need to adapt to maintain stability and foster growth in the long term.