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Economic News

Canada: Trade Volumes Increase on a Lower CAD and the Threat of Tariffs

January 7, 2025
Marc-Antoine Dumont
Senior Economist

Highlights

  • Canada’s international merchandise trade balance deficit narrowed to -$0.3B in November from -$0.5B in October. It was also slimmer than the expectations of economists (-$0.9B)
  • Exports increased by 2.2% m/m while imports edged up by 1.8% in November. In real terms, both exports and imports advanced, with gains of 1.1% and 0.8%, respectively.
  • Canada’s trade deficit with countries other than the United States edged up from $7.2B to $8.5B, driven by exports of precious and non-precious metals. At the same time, the trade surplus with the US also increased to $8.2B from $6.6B.

Comments

The depreciation of the Canadian dollar continued to boost exports and imports for a second month in a row in November. Since most transactions are converted from USD to CAD, a weaker Canadian dollar results in higher export volumes and import prices.

On the export side, nine out of the 11 categories experienced an increase in November. As expected, exports of precious metals continued to be supported by the current high prices. With the anticipated decrease in policy rates worldwide and the increase in gold prices, this category is likely to keep rising in the coming months. Additional solid advances in exports were observed in categories like pharmaceutical products (+11.9%), metal ores and non-metallic minerals (+10.5%), and energy products (+2.1%). This could lead to swings in the opposite direction in December.

On the import side, Statistics Canada mentioned again that delays in data compilation due to the CBSA Assessment and Revenue Management (CARM) digital initiative may lead to significant revisions to import values. Given the repetition of this message, import data should be taken with a grain of salt. That said, the largest contributor to the November increase was the rise in imports of consumer goods. Considering the federal tax break External link. on some products starting in December 2024, consumer goods imports could rise higher in the coming months due to stronger demand.

Implications

As expected, export growth seems to be ending the year at a solid pace as US firms look to build inventories before potential tariffs come into effect. As such, November’s trade data reinforced our tracking for real GDP growth in Q4 2024 to be around 2.0%-2.5% (annualized). This is in line with the Bank of Canada's more recent projection of 2.0%. Looking ahead, Donald Trump's return to the White House and the lingering threat of tariffs are expected to heighten volatility in both exports and imports in the coming months. For more information on our forecast, see our latest Economic and Financial Outlook External link.. 

NOTE TO READERS: The letters k, M and B are used in texts, graphs and tables to refer to thousands, millions and billions respectively. IMPORTANT: This document is based on public information and may under no circumstances be used or construed as a commitment by Desjardins Group. While the information provided has been determined on the basis of data obtained from sources that are deemed to be reliable, Desjardins Group in no way warrants that the information is accurate or complete. The document is provided solely for information purposes and does not constitute an offer or solicitation for purchase or sale. Desjardins Group takes no responsibility for the consequences of any decision whatsoever made on the basis of the data contained herein and does not hereby undertake to provide any advice, notably in the area of investment services. Data on prices and margins is provided for information purposes and may be modified at any time based on such factors as market conditions. The past performances and projections expressed herein are no guarantee of future performance. Unless otherwise indicated, the opinions and forecasts contained herein are those of the document’s authors and do not represent the opinions of any other person or the official position of Desjardins Group.