Canada’s trade balance shifted to a surplus in March driven by higher crude oil prices and increased demand for gold, leading to a notable surge in exports while imports decreased, according to recent data. Statistics Canada reported a surplus of $1.78 billion in March, a stark contrast to the $5.11 billion deficit recorded in the previous month. This marked the first surplus in six months for Canada, largely influenced by the rise in crude oil prices due to the conflict in Iran, which boosted export values. Despite a decrease in gold prices during March, strong global demand for the precious metal contributed to a further increase in exports.
Analysts, who had anticipated a deficit of $2.88 billion, were surprised by the positive trade balance. Total exports saw a significant 8.5% increase to $72.8 billion, with a notable 24% surge in metal and non-metallic product exports reaching a record high, and a 15.6% rise in energy exports hitting their highest level since September 2022. Excluding these categories, Canada’s exports saw a modest 1.1% increase in value but a 0.3% decline in volume.
The statistics agency highlighted a 4.5% increase in exports of motor vehicles and parts in March following a substantial 24.9% uptick in February. The rise in exports to the U.S., driven by higher crude oil prices and increased shipments of passenger cars and light trucks, resulted in a 8.3% increase to $48.51 billion, marking the highest level in a year. In contrast, imports from the U.S. decreased by 1.2% to $41.44 billion. Canada’s trade surplus with the U.S. peaked at $7.1 billion, the highest in six months, while the share of exports to the U.S. dropped to a record low of 66.7%. This trend coincided with the ongoing trade tensions between the two countries, including tariffs imposed by President Donald Trump in an effort to reduce the trade deficit.
Meanwhile, exports to countries other than the U.S. reached a new high in March, with a 9.1% increase, while imports from non-U.S. countries dropped by 2.2%. Following the release of the trade data, the Canadian dollar experienced a slight uptick of 0.03% to 1.3620. Money markets are now factoring in the likelihood of two 25 basis point rate cuts by the Bank of Canada by the end of the year.