Economy

US trade deficit widens by $46.3 billion in June

US trade deficit widens by $46.3 billion in June

Overall exports rose to $50.7 billion in June, the first time they have surpassed the $50-billion mark, as the value of exported energy products jumped 7.1 per cent to $9.9 billion, the highest since October 2014.

In figures also released Friday, the U.S. Commerce Department said the country had a $2-billion United States trade deficit with Canada, up 39.7 per cent from May.

Canada's trade deficit fell to Can$626 million ($482 million US) in June, according to official data released Friday, as the nation searched for new trading partners and eased its reliance on the United States. This led to a 36.8 percent decline in exports of affected steel products to the USA, following a spike in previous months.

"Canadian trade was a large and pleasant surprise in June, and a surge in exports for the month capped a solid quarter", Canadian Imperial Bank of Commerce chief economist Avery Shenfeld wrote in a research note. Excluding energy products, exports were up 3.4 per cent.

Higher shipments of passenger cars and lights trucks south of the border helped drive up Canadian exports to the United States by 2.5 per cent in June to a record $37.1 billion, Statistics Canada reported Friday. Last month, the Trump administration began following through with a March threat of tariffs on tens of billions of dollars of imported Chinese goods, prompting China to respond with retaliatory levies on high-value USA exports such as soybeans.

The latest numbers add to the case for the Bank of Canada to raise rates again in the near-term, Nye said, adding that he expects the central bank to continue its gradual approach to increasing the interest rates.

The report also said the value of imports climbed by 0.6 percent to $260.2 billion in July after rising by 0.5 percent to $258.5 billion in June.

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Exports of transportation equipment and parts were up 18.9 per cent to a record $2.5 billion, with exports of business jets accounting for much of the increase.

National Bank of Canada economist Kyle Dahms suggested that US tariff threats may be temporarily fuelling USA demand for some Canadian goods.

Second-quarter exports rose by 6.0 percent from the first, the greatest such gain in 10 years.

But exports to non-U.S. markets fared even better, surging 8.7 per cent in the month.

"Heading into today's number, June was expected to be a soft month for the Canadian economy, coming off a roaring gain in May and feeling the drag of oil production shutdowns in June", said CIBC economist Royce Mendes in a report.

And so as Yahoo Finance has written before, tax cuts could end up working against Trump's efforts to bring down the US trade deficit, which in 2017 totaled $570 billion.