There was a sharp improvement in Canada’s merchandise trade deficit in April to $1.9 billion from a $3.9 billion deficit in the previous month. In nominal terms, Canada's exports increased 1.6 % to a record $48.6 billion in April, marking the sixth advance over the past seven months. Imports into Canada fell 2.5% in April.

The strong Canadian increase in exports in April was built on a heftier 4% advance in March, and as the data suggest, the large export gain was due to higher volume sales rather than prices.  

After five monthly contractions, Canada's merchandise trade surplus with the United States improved to $3.6 billion in April from a $2 billion surplus in March. On a year to date comparison basis, however, Canada’s trade surplus with the U.S. has shrunk considerably from $16 billion in 2017 to $11.1 billion in 2018l.

Continuing with the country implications, the merchandise trade deficit with China narrowed to $1.2 billion in April from $2.3 billion in March. But Canada’s overall trade with China has deteriorated this year, as the 2018 year to date deficit was $6.5 billion compared to a $4.9 billion deficit for the same four months in 2017.

Thus far this year, Canada’s merchandise trade deficit with the European Union is running roughly at the same level as in 2017 (a cumulative $5.1 billion deficit over the first four months of this year.)  

It is also interesting to focus on the auto trade side, since this broad sector is so concerning to President Trump.

Canada’s nominal trade deficit in automotive products over the first four months of this year is running twice as high as in 2017, $9.1 billion compared to $4.6 billion.

Finally, on June 1, the Trump Administration imposed tariffs on Canadian steel and aluminum products of 25% and 10%, respectively. According to Statistics Canada data, Canadian exports of aluminum products to the U.S. that would be subject to the 10% tariff rate in 2017 amounted to $9.2 billion, while the value of steel exports subject to the 25% tariff was $7.2 billion.

There is little doubt that the recently imposed tariffs on aluminum and steel, together with retaliatory Canadian tariffs, will curb the flow of metals and metal products across the border into the U.S. The drag on the Canadian economy will be heaviest in Quebec and Ontario.