The Canada trade deficit is making headlines today, as Stats Canada numbers for July show a record high of $2.34 billion.This signals a widening gap between our exports (what our country sells abroad) and our imports from the global marketplace.
What This Means For The Canadian Marketplace
Why the drop? Analysts credit falling crude oil exports and record-high imports from the United States on the back of a strong Canadian dollar, which has risen to 13-month highs lately. As a result, Canada’s exports fell 3.4 per cent and imports followed suit, dropping 2.2 percent.
“This is about as bad as it gets for Canadian exporters — at least so far,” said Derek Holt, Scotiabank’s vice-president of economics, in a statement following the release of the data.
Stats Canada also revised its June deficit to $1.93 billion from the original $1.88 billion reported.
The High Dollar vs. Global Finances
Some analysts have cited a shaky global financial market and the ensuing panic as a result of the Greek elections, which led to squeamish investors and consumers; however, Canada’s biggest trading disparity is with the U.S.
“The pattern by country would suggest the difficulties are related to exporting into the U.S. which is Canada’s dominant trading partner and where currency effects are most pronounced,” added Holt. Exports to the U.S. have fallen by 5.5 per cent.
Affecting The Average Canadian
With all the speculation about the world economy’s effect on the deficit, it can be hard for the average Canadian to see how it effects them and their economy.
Canada has always been known as an export-based economy, with one in five jobs tied to exporting activities. Due to this, record-high trade deficits and the rising Canadian dollar suggest a slow down of investment, and could potentially trigger a troubling job market. In the past, our country’s vast stores of mineral wealth, Canadian-made goods and booming energy sector have attracted a wealth of investment from our southern neighbours. In recent years, though – since the U.S. was hit hard by the recession in 2008 – Canada has been looking further ashore for places to peddle its goods.
What’s The Silver Lining?
While this may sound dire, fear not – it’s not all bad.
The slowdown in trade with the U.S. has forced Canada to find new trading partners to make up for the difference. Canada has broadened its scope by building stronger trade relationships with Asia via shipping routes in B.C. and portside infrastructures to help the East tap into our resources.The Harper government is also currently in talks with the European Union regarding a free-trade agreement, with plans for completion by the end of next year.