Canada’s exports rise despite Trump tariffs

Ottawa: Canada’s merchandise trade deficit narrowed by more than expected as the country’s exports show signs of a slow rebound from the shock of U.S. tariffs.

The country’s trade shortfall with the world was C$4.9 billion ($3.5 billion) in July, according to Statistics Canada data released Sept. 4. That’s slightly smaller than the median projection of a C$5.3 billion deficit in a Bloomberg survey of economists.

Total exports rose 0.9% in July, the third consecutive monthly increase, with gains in seven of 11 sectors.

Exports to the U.S. — Canada’s biggest trading partner — rose 5%, driven by energy products and passenger cars, though seasonal adjustment influenced the latter category. U.S. data released separately on Sept. 4 showed that country’s trade deficit widened in July to a four-month high.

The data show some light at the end of the tunnel for Canada’s exporters, who have contended with the severe disruption posed by U.S. President Donald Trump’s tariff barrage. After front-running levies by sending shipments to the U.S. in the first three months of the year, exports were crushed in the second quarter amid the uncertainty posed by the trade policy of the White House.

Still, there’s plenty of evidence the trade war is causing damage. Trump has put tariffs on exports of Canada’s aluminum products, which fell 31% on the month. Steel exports, which also face levies, fell another 2% in July.

“It looks like net trade will be a positive for GDP in the third quarter, but that doesn’t mean that the negatives from this year’s tariff shock are behind us,” Andrew Grantham, economist at Canadian Imperial Bank of Commerce, said in a report to investors.

“Exports in the second quarter were likely below the underlying trend, due to earlier tariff front-running, and so the recent improvement is simply returning us to a new, lower trend level.”

Many of Canada’s exporters are able to avoid the tariffs and keep shipping products if they’re compliant with the free trade agreement between the U.S., Mexico and Canada.

That exemption puts the U.S. effective tariff rate for Canada at between 5% and 7%, economists say. So far this year, exports are still up C$4.7 billion from the same period a year earlier, a 1% increase. In volume terms, exports were up 1.6% in July.

Imports fell 0.7% on the month, the agency said, driven by a decrease in machinery and equipment, after an expensive import of an oil module to Newfoundland boosted imports in June. On a volume basis, imports fell 0.9%.