Canada experienced a trade deficit of $137 million in December, the first deficit after six consecutive monthly surpluses.1 Imports rose 3.7% as exports fell 0.9%. The deficit, which comes after a $2.5 billion surplus in November, is largely attributable to a decline in the price of crude oil.
Canada’s trade deficit with countries other than the United States rose to $8.2 billion in December, a new record. While exports to countries other than the US inched up 0.6%, imports ballooned by 6.6%, including a 9.3% increase from China, partly due to the import of communications equipment and computers.
Survey by Sector
Canada’s drop in exports came largely as a result of a 5.9% decline in energy exports. Although the volume of crude oil exported actually rose for a second straight month, a decrease in value resulted in a 5% drop for the subcategory. Coal exports fell by 33.5%, a loss that Statistics Canada partly attributes to freight disruptions caused by flooding.
Electronic and electrical equipment and parts were the largest contributor to rising import levels. The category saw a 16.2% increase in December, climbing to an all-time high of $7 billion. December increases of communication, and audio and video equipment, the category that includes cell phones, skyrocketed by 52.1%. After supply chain disruptions affected imports throughout the year, the December bump may simply represent a correction.
Motor vehicles and parts imports rose by 5.1% to 8.9%, the highest monthly level since February of 20202. Meanwhile, imports of basic and industrial chemical, plastic, and rubber products rose by 6.2% to a record of $5 billion.
Year End Trends
2021 was a year of sharp monthly movements in both imports and exports, a trend that makes sense under the context of global supply chain disruptions. Importing semiconductor chips was a problem, which, in turn, impacted manufacturing, and, thus, exports. Raw material prices also rose substantially, affecting both sides of the import/export ledger.
Canada’s annual merchandise exports rose by 22% compared to 2020 numbers, more than erasing the 12.3% dip experienced during the first year of the pandemic. Price played a role in this, however; in constant dollars our yearly exports remained 5.4% lower than in 2019.
Imports too were up 12.2% from 2020, and 2.7% from 2019. Motor vehicles and parts, as well as energy products, however, saw net import drops over the time period.
Supply Chain Drama
With the prospect of empty shelves making news, William McKinnon believes that panic is unwarranted.
“I think there is some drama around the supply chain currently,” says the Canadian Alliance President, who acknowledges that people may face reduced choice at the grocery store in the near term. “I don’t believe that people will go without the basic essentials.”
Chunky Supply and Move Away from JIT in Food Industry
What he has noticed for his clients in the food industry is what he calls a ‘chunky supply’, prompting many to move away from the just in time model in favour of large orders, when possible.
He’s also noticed his clients being called upon to provide flexibility to their clients, resulting in orders being shifted after they’ve been placed.
“We’ve never seen that type of activity before,” says McKinnon. “This tells me that there’s some power being exerted by the retailers to the food manufacturers or food distributors to get what they want.”
McKinnon notes that the turbulence has left some of his clients ‘frazzled’, conceding that “it’s hard to do business that way”.
On the other hand, times are good for specialty food manufacturers and distributors; consumers are opting to experiment in the kitchen as opposed to visiting the restaurant, and shortages on staples are increasing demand for upmarket alternatives.
Impact of Trucker Vaccine Mandate on Supply Chain
With unvaccinated truckers now unable to cross the border, some fear that grocers will have even more trouble filling their shelves. McKinnon believes that supply and demand will eventually rectify the situation.
“I think they’ll just pay drivers more to go,” he says. “There’s typically a premium paid to individuals to cross the border. As prices go up, vaccinated drivers who typically prefer driving domestically will be attracted to those routes and the cost will be passed along to the supply chain.”
“The Canadian Alliance Transport Team has been successful in getting loads moved to the US,” explains McKinnon, “it’s just that the prices have gone up. There’s also a need to book further in advance because there’s less transactional capacity out there.”
Trucker Labour Shortage
Of greater concern to McKinnon than the news of the day, is the overall trajectory of the supply of truck drivers.
“We’ve been talking for 20 years about the eventual exit of Boomers from the industry,” he says. “Less rubber will be hitting the road in the next five years unless more capacity is created.”
McKinnon notes that fewer Canadians are particularly interested in truck driving careers, believing that a continued robust immigration policy will be part of the solution.