Canada's trade gap swells but import, export growth signals economic momentum

Canada's trade gap swells but import, export growth signals economic momentum

Canada's trade gap swells but import, export growth signals economic momentum

Canada's trade deficit unexpectedly widened to a record in March as a surge in automobile imports outpaced a rebound for the nation's exporters.

The Commerce Department said the trade deficit narrowed to $49.0 billion in March from a revised $57.7 billion in February.

The U.S.'s trade deficit shrank in March to the lowest point since September of 2017, even as President Donald Trump's trade negotiations are heating up.

Meanwhile, U.S. exports climbed 2% from February to their highest dollar value on record including larger shipments overseas of civilian aircraft, soybeans, corn and crude oil.

Demand for USA exports has helped support the manufacturing sector, aided by a weaker dollar and stronger growth overseas.

Exports were lifted by the rebound in the agricultural sector, up almost 15 per cent, reversing February's 14-per-cent slump, as the sector bounced back from its temporary transportation problems.

U.S. exports of goods and services hit US$208.5 billion, a new record, driven upwards by mounting exports of crude oil and other fuels as well as civilian aircraft and crops like soybeans, on which China has threatened to impose tariffs in response to punitive USA duties on Chinese goods.

A delegation from the Trump administration is in Beijing this week to discuss trade issues including the huge trade deficit, property issues and China's subsidy structure.

In response to Trump's plan to levy tariffs on about $150 billion of Chinese products, China targeted about $50 billion US products, with soybeans and small planes included. Policy makers will be reassured by a rise in exports and signs of dissipating railway bottlenecks, while the jump in imports implies trade acted as a major drag on first-quarter growth.

The U.S. dollar.DXY was little changed, consolidating some of its recent gains, after the Federal Reserve on Wednesday held interest rates steady but stayed on course to hike in June. There were also increases in exports of soyabeans, corn and crude oil. Real goods exports were the highest on record. USA stock index futures were slightly lower.

In March, exports of goods and services increased 2 per cent to an all-time high of US$208.5 billion, lifted by a US$1.9 billion increase in shipments of commercial aircraft.

Imports of goods and services fell 1.8 per cent to US$257.5 billion, in part as the boost from royalties and broadcast licence fees related to the Winter Olympics faded.

"While the import boom is by itself a headwind to GDP, the associated implications for domestic demand suggest that the economy maintained healthy momentum in March", said Canadian Imperial Bank of Commerce economist Royce Mendes.

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