Canada's August Trade Deficit Widens More Than Forecast as Exports Drop

• Canada's merchandise trade deficit widened in August to C$6.32Bn ($4.53Bn), its second-highest on record, as exports both to the U.S. and the rest of the world fell, data showed.
• The August data had been expected to show a more permanent impact of U.S. President Donald Trump's tariffs on Canada, after exports increased earlier in the year to beat the tariffs and then dropped off sharply. Total exports dropped by 3% in August from July, while imports increased 0.9%, Statistics Canada said. It was the first decrease in total exports since April. In volume terms, exports fell 2.8% in August.
• Analysts polled by Reuters had forecast the August trade deficit at C$5.55Bn, up from an upwardly revised C$3.82Bn in the prior month. Meanwhile, Trump imposed sectoral tariffs on Canada early this year, forcing businesses to reorient their supply chain from its biggest trading partner. But the shift has been volatile, erratic, and difficult.
• Overall, exports dropped in eight of the 11 product sections in August, with forestry, industrial machinery, and metals leading the charge. Exports to the U.S. were at C$44.18Bn, down 3.4% from July, StatsCan said, adding it was primarily led by unwrought gold exports. But other product categories contributed to the decline, including lumber, machinery, and equipment. Canada's share of exports to the U.S. fell below 70% a few months ago before recovering to 73% in August, compared with 75% during the same period last year.
• Prime Minister Mark Carney will be meeting with Trump on Tuesday as he comes under pressure to address the impacts of U.S. tariffs on critical sectors such as steel, cars, and lumber. Imports from the U.S. were down 1.4% in August, every month, shrinking the total trade surplus with its southern neighbour to C$6.43Bn from C$7.42Bn in July.
• Exports to countries other than the United States were down 2% in August, a third consecutive monthly decline, Statscan said. Lower exports of crude oil and nuclear fuel contributed most to the monthly decrease. However, Canada's imports from the rest of the world, barring the U.S., rose 4.2%, reaching a record in August, StatsCan's data showed. This pushed Canada's trade deficit with countries other than the United States to a record high of C$12.8Bn in August from C$11.2Bn in July, StatsCan said. The Canadian dollar was slightly weaker after the trade data, down 0.13% to 1.3960 to the U.S. dollar, or 71.63 U.S. cents. Yields on the two-year government bonds were up 0.2 basis points to 2.469%

(Source: Reuters)