Canada’s trade balance shifted to a surplus in March driven by higher crude oil prices and increased demand for gold, leading to a notable surge in exports while imports decreased, according to recent data. Statistics Canada reported a surplus of $1.78 billion in March, a significant turnaround from the $5.11 billion deficit in the previous month. This marked the first surplus in six months for Canada, attributed to heightened crude oil prices due to the conflict in Iran, which raised the value of Canadian exports. Despite a decline in gold prices during March, strong global demand for the precious metal continued to boost exports.
Analysts, previously anticipating a $2.88 billion deficit, were surprised by the positive outcome. Total exports saw a substantial 8.5% increase to $72.8 billion, with notable spikes of 24% in metal and non-metallic products exports – reaching a record high, and a 15.6% increase in energy exports, hitting their highest level since September 2022, as reported by StatsCan. Excluding these categories, Canadian exports experienced a modest 1.1% increase in value terms but a slight 0.3% decrease in volume terms.
Following a 24.9% surge in February, exports of motor vehicles and parts rose by 4.5% in March, according to the statistics agency. The exports to the U.S. were driven by higher crude oil prices and increased shipments of passenger cars and light trucks, resulting in an 8.3% increase to $48.51 billion in March, the highest level in a year. Conversely, imports from the U.S. dropped by 1.2% to $41.44 billion. Canada’s trade surplus with the U.S. reached a six-month high at $7.1 billion, while its share of exports to the U.S. decreased to 66.7%, the lowest ever recorded. This decline is amid the ongoing trade tensions with the U.S., characterized by President Donald Trump’s imposition of tariffs on Canadian goods to reduce the U.S. trade deficit with Canada.
Furthermore, Canada’s exports to countries other than the U.S. hit a new record high in March, rising by 9.1%, while imports from non-U.S. countries decreased by 2.2%. Post the trade data release, the Canadian dollar saw a slight increase of 0.03% to 1.3620. Money markets are currently pricing in two 25 basis point rate cuts by the Bank of Canada by the year’s end.
