Canada exports hit record in June, shrug off U.S. metals tariffs

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Canada's overall merchandise trade deficit with the rest of the world dropped dramatically in June to 626 million Canadian dollars (about 482 million US dollars), the lowest since January 2017, Statistics Canada said Friday.

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 economy showed some surprising resilience in the face of newly minted USA tariffs on Canadian steel and aluminum industries with strong export growth in most other sectors softening the blow of those new duties.

Shortly before the numbers were released, Beijing warned it was ready to impose new tariffs on $60 billion in American products, responding to Trump's plans to jack up the punitive duties on the next $200 billion in Chinese goods to be targeted.

"Exports will rise over the quarter, but strong domestic demand growth will lift imports more rapidly", he said in a client note.

"Consistent with supply dynamics, the impact looks to be larger on steel than aluminum, but in the broader scheme of things, the impact thus far appears to be minimal", he said.

The data underscored the importance to Canada of the United States, which took 73.0 percent of all Canadian goods exports in June. Data for May was revised slightly to show the trade deficit falling to $43.2 billion, instead of the previously reported $43.1 billion.

Canada's total exports increased 4.1 per cent to $50.7 billion in June, the first time they have topped the $50-billion mark.

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"But the first indications for the month suggest that there could be some growth left to come in the second quarter, upgrading the odds of a likely Bank of Canada rate hike in the coming months".

Canada's trade gap narrowed dramatically in June, to its smallest in 17 months, as the country's exports surged to record levels even as protectionist trade clouds gathered.

The unexpected export performance has heightened expectations that the Bank of Canada will raise its interest rates next month.

Rising oil prices also boosted the value of American crude exports, which were the highest on record at $20.4 billion.

Exports to the United States were up 2.5 per cent month over month, lifting Canada's merchandise trade surplus with its neighbour to $4.1-billion from $3.3 billion. Exports of passenger cars and light trucks were up 5 per cent in the month.

Canada imported products worth $51.3 billion in June, despite increases in seven of 11 product sections.

The U.S. economy accelerated to a 4.1 percent pace of growth in the second quarter, the fastest since 2014.