April 24, 2018

Canada increases trade with USA, but trade deficit widens

06 April 2018, 01:42 | Rufus Hill

Canada's trade deficit widens to $2.7B in February

The Maersk ship Adrian Maersk is seen as it departs from New York Harbor in New York

USA trade deficit increased to the highest level in more than nine and half years in February, against the background of rising trade tensions between the United States and China, the world's two largest economies.

A report released by the Commerce Department on Thursday showed the U.S. trade deficit widened by more than anticipated in the month of February. The services surplus was dragged down $1 billion in payments for broadcast rights for the 2018 Pyeongchang Winter Olympics, which count as a services import.

Exports of aircraft and other transportation equipment and parts also gained 19.6 per cent to $1.7 billion.

"The U.S. continues to expand faster than most other industrialized countries, so it should not surprise anyone that the trade deficit is worsening", said Joel Naroff, chief economist at Naroff Economic Advisors in Holland, Pennsylvania."Tariffs may sound like a good way to change the pattern of trade, but they tend to raise prices rather than modify the trade fundamentals".

However, they wrote that the rising trade tension between the United States and China, which have each announced plans for tariffs on $50bn of the other's goods, are a "potential fly in that ointment".

Elsewhere, the February numbers were replete with more records: USA exports of autos, parts and engines were the highest on record at $14.8 billion for the month. He has also slapped 25 percent import duties on steel and 10 percent on aluminum.

The February result overshot the expectations of economists, who were calling for the trade deficit to hold steady at January's level, previously the highest since October 2008. Stocks on Wall Street were trading higher while prices for U.S. Treasuries fell.

The US trade deficit widened in February for the sixth straight month, hitting a fresh nine-and-a-half-year record even though US exports were at an all-time high, official data showed on Thursday.

Wells Fargo analysts said they expect to see exports and imports grow in coming months, with strong domestic demand leading to further widening of the deficit.

"But net trade is still on course to have subtracted from first-quarter GDP growth, and the widening deficit will not have gone unnoticed in the White House", Hunter said. In real, or volume terms, exports rose by 0.6 percent.

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