Canada’s economy continued to run a trade deficit in August, according to new data from Statistics Canada. Given Canada’s relatively small population, trade activity is a critical component of Canada’s economy. A trade deficit, however, could be negative for Canada’s economy. Canada’s gross domestic product benefits when exports are greater than imports. But like other markets, Canada’s trade balance swings between a surplus and deficit, due in part to changing economic conditions and commodity prices.

• Exports from Canada dropped by 1.0% over August to $64.3 billion. This marked the third straight decline and the lowest value of exports since May. Energy exports fell sharply, due in part to lower oil prices. This will have a negative impact on Canada’s energy sector.
• On the other hand, imports increased by 0.3% to $65.4 billion over the month. Purchases for metals products, industrial machinery, and farm and fishing products increased over the month.
• The changes in exports and imports resulted in Canada’s economy running a trade deficit of $1.1 billion in August. This was Canada’s largest trade deficit since May and sixth straight overall. If the trade deficit persists in September, trade activity could detract from Canada’s third-quarter economic growth.
• The US also reported another trade deficit in August. However, the deficit was narrower compared to July. Exports edged higher while imports posted a small decline.

Canada’s persistent trade deficit could weigh on its economic growth in the third quarter of 2024. In August, the drop in exports came in part due to lower oil prices, which decreased the value of energy exports. This highlights the impact changing commodity prices can have on Canada’s resource-rich economy.

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