Canada is becoming far more attractive in commodity goods to the rest of the world, as it diversifies its trade away from the U.S., says one analyst.
Imports outpaced exports in October, according to new data by Statistics Canada.
Merchandise imports increased by 3.4 per cent in October while exports increased by 2.1 per cent. Because of this, Canada’s merchandise trade balance went from a surplus of $243 million in September to a $583 million deficit in October.
“This is a good first data snippet,” William Pellerin, a trade lawyer and partner at the firm McMillan LLP told BNN Bloomberg.
“We’re seeing a rapid increase in imports into Canada for products that historically were going to the U.S.,” said Pellerin.
Whether it be Malaysian kitchen cabinet manufacturers, or Chinese goods, he said “Canada is becoming far more attractive at lower pricing in many commodity goods and in many manufactured sectors.”
On the other hand, the data shows exports to the U.S. made up 67.3 per cent of all Canadian exports, which is the lowest since the pandemic.
Pellerin said Canada is facing strong headwinds in diversifying exports as the government pushes towards diversification into new markets.
Gold, other metals push export numbers higher
Gold, silver and platinum group metals helped edge export numbers higher by 2.1 per cent in October according to Statistics Canada.
Apart from those metals, total exports fell 2.5 per cent.
Pellerin said the broad shift in exports may not be happening yet but he has seen Canadian gold shipments go to the U.K. instead of the U.S.
“It’s more about circling the wagons than anything else, particularly on those Canadian businesses that are exposed to the U.S. market that have historically been captive to the U.S. market,” said Pellerin.
“It’s more about survival before we can diversify exports. They need to get through this valley where we’re seeing clients lose access to the U.S. market due to those sectoral tariffs.”
Canadian wood and cabinet makers
Cabinet and wood makers face a difficult challenge as they face a 25 per cent tariff and lose access to the U.S. market, said Pellerin.
He said the increase in imports in Canada is because the entire rest of the world has also lost access to the U.S. market because of that tariff.
Pellerin said the tariffs on wood products only went into effect in October, so November, December, and January data, when it comes out, may tell a different story which he feels is “going to show a further erosion of sales and exports to the U.S across a broad swath of sectors.”
Rise in steel imports
Pellerin expects a rise in steel imports which he believes will further play with the trade deficit number into November and December.
“So picture that movement away from the U.S. because of those sectoral tariffs,” said Pellerin.
“Then we’re going to start seeing perhaps a diversification of exports over time for those companies that can make it through the valley,” said Pellerin.
