Canada’s trade surplus reached a four-year peak in May, marking the fourth consecutive monthly increase, with exports to the United States hitting their highest level since February last year. Statistics Canada reported that Canada recorded a trade surplus of $4.24 billion in May, up 0.9% from the revised $3.41 billion in the previous month. This surplus, the third in a row for Canada, was driven by a 1.5% rise in exports to the U.S., its primary trading partner.
Despite challenges stemming from U.S. tariffs impacting certain Canadian sectors, businesses are endeavoring to diversify away from the U.S., which traditionally accounted for approximately three-quarters of Canada’s total exports. However, experts caution that while diversification is crucial, unraveling longstanding supply chains from the U.S. may take time.
Exports to the U.S. surged by 1.5% to $53.72 billion in May, marking the fourth consecutive monthly increase. Meanwhile, imports from the U.S. declined by 1.4%, leading to an expanded trade surplus of $11.6 billion with the U.S. in May, up from $10.3 billion in April. Higher energy export prices may have contributed to this growth, according to Statistics Canada.
On the other hand, exports to countries other than the U.S. continued to decline in May, albeit at a slower pace compared to April, while imports from non-U.S. nations increased. As a result, Canada’s trade deficit with countries other than the U.S. widened to $7.4 billion in May.
In terms of specific exports, metal ores and non-metallic minerals saw a significant uptick, rising by 16.1% in May. The increase was predominantly driven by sulfur exports, which were affected by slowed shipments through the Strait of Hormuz due to Middle East conflicts. Following a ceasefire in mid-June, shipments have gradually resumed.
While crude oil and gold exports, previously key contributors to Canada’s trade balance, declined, energy exports dropped by 2% primarily due to lower crude oil volumes. Total imports decreased by 0.2%, with a notable 18.2% drop in metal and non-metallic imports in May. Despite the decline in energy exports, economist Robert Kavcic from BMO noted that energy exports still positively impact Canada’s trade performance, albeit at a reduced level.
Kavcic cautioned that trade surpluses in Canada can fluctuate rapidly based on oil price swings, indicating that the current surplus levels may not be sustained. Nevertheless, net exports are expected to bolster growth in the second quarter, signaling a positive turnaround for the Canadian economy.