- More by Michael Al-Said
USA and Canada are buying more from rest of world while selling less than ever before
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Canada’s trade gap with the world widened to its largest level on record in December.
The respective trade deficits of USA and Canada surged to their highest levels on record at the end of 2018, according to figures released on Wednesday.
Statistics, Canada reported exports declined by 3.8 per cent during the month, led by a slowdown in energy products that have now declined for five months in a row. Coupled with a 1.6 per cent increase in imports on the other side of the ledger, that pushed the overall trade gap to $4.6 billion, the highest monthly total on record.
“Looking beneath the headline numbers, the broad-based weakness in exports and the negative volumes print is discouraging,” TD Bank economist Omar Abdelrahman said.
The trade gap grew because Canada bought more from and sold less to countries that aren’t the U.S. If Canada’s largest trading partner is stripped out of the numbers then that is why Canada’s trade gap looked even wider during the month , $6.4 billion. Canada’s trade gap with the U.S., meanwhile, narrowed to just $1.8 billion as the two nations look more and more like a closed economic loop of two.
Canada’s annual trade gap over recent years ranges from $21.7 bn to $24.6 bn.
But a yawning trade gap was no monthly blip south of the border.
The U.S. Department of Commerce reported on Wednesday the country’s trade gap widened by 19 per cent in December 2018 to $59.8 billion US, it’s the biggest monthly amount in more than a decade, and enough to bring the U.S. trade gap in goods to its biggest annual gap ever, at $891.3 billion for 2018 as a whole. Yes that’s right, $0.8913 TRILLION USD per year
The US trade deficit, which Trump claims so hard to have irradiated, is not only at record high levels but is enough to put any worried Canadian economist’s mind at ease with their own deficit.
The trade gap is a frequent target for President Donald Trump, because he thinks it signifies other countries are taking advantage of the US by shipping billions of dollars worth of goods to the country while not buying as much in the other direction. It’s why he has slapped tariffs on hundreds of billions of dollars worth of goods from dozens of countries, in the hopes of levelling the scales, as he sees them.
But Friday’s figures show the US economy is still importing more than ever from the rest of the world. A big reason for that is the persistent strength of the US dollar. It makes foreign manufacturers look even cheaper, and gives U.S. consumers even more purchasing power when buying foreign-made products versus domestically produced ones.
“Broad dollar strength is only going to make the deficit worse despite Trump’s protestations,” Scotiabank economist Derek Holt said after the numbers were released Wednesday.
When the US produces less quantities, less choice and at higher costs, no amount of tariffs will correct the deficit. It’s basic high school business 101.
This story is about TRADE
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