Canada falling behind Mexico as America’s No. 1 partner
After the disruptions of the pandemic, globalization took a back seat to “reshoring, near-shoring and friend-shoring” as countries, particularly the United States, looked to lock down supply chains.
Trade between Canada and the United States totalled $920 billion in the year ending in the first quarter of 2024, or an average of $2.5 billion in trade crossing the border every day.
Two-way trade between the United States and Mexico totalled $905 billion, and is on track to surpass Canada sometime this year, they said.
This isn’t the first time.
Mexico’s $167 billion deficit compared to Canada’s $38 billion “is the largest it has ever been (partly mirroring a shrinking trade shortfall with China, which is raising eyebrows in Washington,” said the report.
Trade between Canada and the United States in goods was almost $780 billion in this past year, with services at about $140 billion. That’s a goods trade deficit of about $70 billion and a services trade surplus of $32 billion.
But goods trade is “very lopsided” when viewed by sector, say the economists.
But since 2008 the United States has run a manufacturing surplus with Canada, amounting to $35 billion in the past year.
If you take oil and gas out of the picture, the U.S. has a $30 billion goods trade surplus with Canada.
- Canada’s Digital Services Tax: The 3 per cent levy on digital services revenue came into effect on June 28.
- Dairy, poultry and eggs supply management: Under the USMCA, Canada committed to give the U.S. greater access to these markets, particularly dairy. However, U.S. producers have complained about the way Canada has meet these quotas, saying that priority is given to lower value dairy ingredients rather than finished products.
- Quebec French language law Bill 96 regulations regarding trade marks
The list doesn’t end there. Other trade “irritants” between Canada and the U.S. highlighted by the economists include:
- The Online streaming Act, which gives power to the Canadian Radio-Television and Telecommunications Commission (CRTC) to order large online streaming services to contribute 5 per cent of revenues to funds that promote Canadians productions. This has been challenged in court by the Motion Picture Association Canada on behalf of Netflix, Walt Disney, Warner Bros Discovery and Paramount Global. Members of Congress have also petitioned for an investigation.
- The Online News Act, which aims to ensure digital platforms compensate news media for their content.
- Rules of origin in the auto industry: the criteria used to determine whether a good has undergone sufficient production in the USMCA region to be eligible for preferential tariff treatment.
“Despite total trade with Canada resulting in an overall U.S. surplus outside of the oil and gas sector, with U.S. elections approaching and 2026’s review of the USMCA on the docket for the next Administration and Congress (regardless of who, or which party, wins), the above U.S.-Canada trade irritants and others simmering on the backburner could become increasingly problematic,” said the economists.
The diminished forecast comes amid a rising supply of homes on the market.
New listings were up again in June, the latest increase in five of the six past months.
“In some markets, the outstanding inventory of homes for sale has rarely been higher and, while location/type matter a lot, it’s fair to say that a gradual building of resale inventory continues,” said Robert Kavcic, senior economist at BMO Capital Markets.
“The months’ supply of homes for sale sat at 4.2 in June, or just off the highest in four years.”
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