By Promit Mukherjee
OTTAWA, March 12 (Reuters) – Canada’s trade deficit in January surprisingly widened as exports fell more than imports, led by a meaningful drop in shipments of motor vehicles and parts due to seasonal production stoppages, data showed on Thursday.
Statistics Canada said the country posted a deficit of C$3.65 billion ($2.69 billion) in January, almost three times more than the deficit of C$1.3 billion observed in December.
Analysts polled by Reuters had forecast a C$900 million deficit for the month.
Canada’s international merchandise trade is heavily skewed to the U.S., its biggest trading partner. Both exports to and imports from the U.S. dropped in January, with the U.S. accounting for 68% of Canada’s total exports.
Total exports fell by 4.7% in January, the largest drop since April last year. Exports declined in six out of 11 categories, StatsCan said.
In volume terms, exports declined 5.8%, it said.
Exports of motor vehicles and parts slid to their lowest since September 2021, posting a massive 21.2% drop. This was mainly due to lower motor vehicle production in Canada following prolonged seasonal production stoppages, the statistics agency said.
U.S. President Donald Trump has imposed tariffs on vehicles and auto parts that are not compliant with the U.S.-Mexico-Canada free trade deal and that have non-U.S. content in them and that has dented some exports previously.
Exports of metal and non-metallic mineral products fell by 8% in January, primarily led by lower exports of unwrought gold to the United Kingdom.
Higher energy exports, which rose by 4.1%, helped offset some of the decline. This is Canada’s biggest export category by value, and contributes close to a quarter of its total exports.
“It’s a really pretty rough start to the year,” said Prince Owusu, senior economist with Export Development Canada.
“So when you have had such a good run over the last couple of months, you can expect some pullback after, so it’s not really a big surprise,” he said, adding that the increase in deficit is primarily seasonal.
Canada’s international trade could benefit in the coming months from higher crude oil prices due to the war in the Middle East, and some of the seasonal changes such as auto production and aircraft exports are likely to bounce back in the coming months, Owusu said.
Exports to the U.S. fell 3.8% and imports dropped by 3.4%, shrinking Canada’s trade surplus with its neighbor to C$5.4 billion in January, below the C$5.7 billion seen in the prior month.
Exports to countries other than the U.S. dropped 6.5% after reaching a record high in December, mainly due to the drop in unwrought gold exports to the UK.
Imports from countries other than the U.S. increased 2.1% in January, due in part to higher imports of industrial machinery from China, StatsCan said.
Canada’s total imports dropped by 1.1% in January, with decreases in seven out of 11 product categories.
(Reporting by Promit Mukherjee; Editing by Dale Smith, Jan Harvey and Mark Porter)
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