Canada’s trade surplus in May reached a four-year peak, marking the fourth consecutive month of expansion. Data released on Tuesday revealed that exports to the United States hit their highest level since February last year, propelling Canada’s trade surplus to $4.24 billion, up 0.9% from the revised figure of $3.41 billion in the previous month.
This marks the third straight month of trade surplus for Canada, driven by a 1.5% surge in exports to the U.S., its primary trading partner. Analysts had projected a trade surplus of $2.85 billion, underscoring the better-than-expected performance.
Despite challenges posed by U.S. tariffs impacting key Canadian sectors, efforts to diversify away from the U.S. market have been ongoing. However, experts caution that unraveling long-established supply chains with the U.S. may take time.
Exports to the U.S. rose by 1.5% to $53.72 billion in May, with the share of exports to the U.S. nearly reaching 70%. Meanwhile, imports from the U.S. declined by 1.4%, widening the trade surplus with the U.S. to $11.6 billion in May.
Canada’s trade deficit with countries other than the U.S. expanded to $7.4 billion in May, as exports to non-U.S. nations continued to decrease, albeit at a slower pace compared to April. On the other hand, imports from non-U.S. countries rose during the same period.
The upsurge in exports for May was primarily fueled by increased shipments of metal ores and non-metallic minerals, which saw a notable 16.1% rise. Notably, sulfur exports played a significant role in this growth due to disruptions in the Middle East affecting shipping through the Strait of Hormuz.
While some sectors like crude oil and gold exports experienced declines, other segments such as consumer goods, industrial chemicals, and farm products showed positive gains in May.
Despite the drop in energy exports by 2%, Canada’s trade balance was still supported by robust energy exports, according to senior economist Robert Kavcic from BMO. Kavcic noted that fluctuations in oil prices could quickly impact trade surpluses, but the recent data suggests a positive outlook for the Canadian economy in the second quarter.