OTTAWA-Canada posted its largest trade deficit on record in March, as a surge in imports-in particular motor vehicles and parts-more than offset a solid gain in exports.
The surge in exports was powered by increased deliveries of commercial aircraft, petroleum, and even soybeans and corn ahead of pending tariffs by China in retaliation for US trade sanctions.
Wage growth is also rising, with hourly compensation accelerating in the first quarter, more evidence that inflation pressures are building.
The Federal Reserve on Wednesday left interest rates unchanged.
The trade deficit with China, as President Donald Trump says has benefited from bad U.S. trade policy, fell 11 per cent to $25.9 billion in March. As a result, the trade surplus with the United States shrank to C$1.68 billion from C$2.28 billion in February.
Imports from the US rose 3.1 per cent in March due in large part to higher imports of passenger cars and light trucks, while exports to the USA rose 1.2 per cent, led primarily by higher exports of crude oil.
The politically sensitive goods trade deficit with China dropped 11.6 percent to $25.9 billion, which will probably do little to ease tensions between the United States and China.
China, which denies it coerces such technology transfers, has threatened retaliation in equal measure, including tariffs on USA soybeans and aircraft.
"Talk of a potentially damaging trade war has even contributed to recent declines in USA stocks and it may be hurting the economy", it added.
Economists who critique the significance of bilateral deficits nonetheless agree that large sustained overall trade deficits can suppress demand and slow economic growth.
The Bank of Canada, which has long fretted about the sluggish performance of Canadian exporters, says the sector could be hit by uncertainty over the future of the North American Free Trade Agreement.
Prospects for the economy are brightening.
The number of people receiving benefits after an initial week of aid dropped 77,000 to 1.76 million in the week ended April 21, the lowest level since December 1973.
Over the past three years, the worsening of the non-oil trade deficit has been comparable in magnitude to the worst part of the 2000s "China shock" period, reaching 3.5 percent of GDP between 2014 and 2017 compared to 3.6 percent of GDP between 2002 and 2005. Given the failure of the Trans-Pacific Partnership to obtain majority support in Congress, such a major redo of the past USA trade agreement model is also necessary for a new pact to be approved by Congress.
USA exports rose by 2 per cent month-on-month in March to... There were also increases in exports of soybeans, corn and crude oil. "Nevertheless, we anticipate that improved momentum, stronger demand from the USA, and a sub-80-U.S. -cent loonie should encourage a rebound in Canadian exports in the second quarter", said Fotios Raptis, senior economist at Toronto-Dominion Bank, in a research report.
Exports to China jumped 26.3 percent in March.
Imports of goods and services fell 1.8% in March to $257.5 billion. "They're buying beans in Canada, in Brazil, mostly Brazil, but very deliberately not buying anything from the U.S".
While March was a good month for soybean producers, the future spells trouble with escalating tariff threats between China and Washington.
However, the government statistical agency noted higher than usual import levels of light trucks, as well as increased imports of clothing, footwear and accessories, and pharmaceutical and medicinal products. The department, however, revised March orders for non-defense capital goods excluding aircraft, which are seen as a measure of business spending plans, to show them falling 0.4 percent instead of dipping 0.1 percent as reported last month.