Canada's Merchandise Trade Deficit Narrows as Export Dynamics Shift

Canada's merchandise trade deficit decreased in December, with exports outpacing imports. A notable drop in export share to the United States was observed, largely offset by increased exports to other countries. Metals and mineral products, especially gold, drove export growth. Imports also rose, led by gold, vehicles, and energy.

In December, Canada's international merchandise trade deficit saw a significant reduction as exports accelerated at a faster rate than imports, according to Statistics Canada data released on Thursday. Notably, the share of exports directed to the United States fell to unprecedented levels, excluding COVID-19 months.

The December trade figures revealed a C$1.31 billion ($957 million) deficit, a stark contrast to the adjusted C$2.59 billion deficit recorded in November. Economists had anticipated a deficit closer to C$2 billion for December. The increased export activity was primarily influenced by a surge in metals and non-metallic mineral product shipments, most prominently seen in a 37% rise in unwrought gold exports, spurred by escalating prices.

Although Canadian exports to the United States, its largest trade partner, grew by 1.1%, they accounted for just over 67.4% of total exports, a considerable decline from 76.2% a year prior. Exports to countries beyond the U.S. reached record levels, driven by gold exports to the United Kingdom, despite a 3% fall in imports from these regions. This helped reduce Canada's trade deficit with non-U.S. countries by $2 billion from November.

(With inputs from agencies.)