Canada saw its merchandise trade surplus expand to a four-year peak in May, marking the fourth consecutive month of growth. Data released on Tuesday revealed that exports to the United States hit their highest level since February of the previous year, contributing to a trade surplus of $4.24 billion in May, up 0.9% from the revised figure of $3.41 billion in April.
This marked the third straight month of trade surplus for Canada, with a notable 1.5% increase in exports to the U.S., its primary trading partner. Analysts had forecasted a trade surplus of $2.85 billion.
Despite challenges from U.S. tariffs impacting key sectors in Canada, businesses have been striving to diversify away from the U.S., which traditionally accounted for the majority of Canada’s exports. However, experts caution that transitioning away from established supply chains with the U.S. may take time.
Exports to the U.S. climbed by 1.5% to $53.72 billion in May, marking the fourth consecutive monthly rise. Conversely, imports from the U.S. decreased by 1.4%, leading to a widened trade surplus of $11.6 billion with the U.S. in May, up from $10.3 billion in April.
While exports to non-U.S. countries continued to decline, albeit at a slower pace than in April, imports from non-U.S. nations increased. This resulted in Canada’s trade deficit with non-U.S. countries expanding to $7.4 billion in May.
The surge in exports in May was primarily driven by increased shipments of metal ores and non-metallic minerals, which rose by 16.1%. Notably, sulfur exports played a significant role, particularly as shipments were affected by conflicts in the Middle East.
Other product categories also experienced substantial growth in May, with notable increases observed in consumer goods, industrial chemicals, and agricultural and fishing products. However, exports of crude oil and gold, which had previously bolstered Canada’s trade surplus, saw a decline.
Energy exports fell by 2% due to decreased crude oil volumes, following a significant 43.1% increase from February to April. Total imports decreased by 0.2%, driven by an 18.2% drop in metal and non-metallic imports in May.
Economists suggest that while the value of energy exports is currently supporting Canada’s trade balance, the recent drop in energy exports may impact future trade figures. Nonetheless, the positive trade surplus is expected to contribute to growth in the second quarter, indicating a recovery in the Canadian economy.