Canada enjoys lowest trade deficit since January 2017

President Donald Trump pauses during a rally Thursday Aug. 2 2018 at Mohegan Sun Arena at Casey Plaza in Wilkes Barre Pa

President Donald Trump pauses during a rally Thursday Aug. 2 2018 at Mohegan Sun Arena at Casey Plaza in Wilkes Barre Pa

Even after the USA imposed tariffs on steel and aluminum, Canada's trade gap narrowed to $626 million in June, down from $2.7 billion a month earlier, Statistics Canada said Friday in Ottawa.

The city's industrial zone looms over residential neighborhoods in Hamilton, Ontario, Canada May 14, 2017.

Canada's largest trading partner, the United States, was the destination for a record $37.1 billion of exports in June, up 2.5 per cent - mainly because of passenger cars and light trucks, Statistics Canada reported.

"We look for the trade deficit to widen modestly ahead as export growth slows on the heels of cooler global momentum while imports remain well-supported by fiscal stimulus and solid domestic demand", Oxford Economics' Gregory Daco and Oren Klachkin wrote in a note to clients Friday. Canada is the largest single supplier of steel to the United States, where some companies are complaining about increased prices. But most still think the central bank will wait until October, to give itself more time to gauge the impact of trade uncertainty, and will hold rates steady in its next rate announcement in early September.

Average prices for imported oil hit the highest level since December 2014 at $73.60 a barrel - bringing the value of oil imports for the month to $19.6 billion, also the highest in three and a half years.

Second-quarter exports rose by 6.0 percent from the first, the greatest such gain in 10 years. Yields on 2-year government bonds rose to 2.1 per cent, touching the highest in nearly a decade.

Those risks include talks with the US and Mexico to update the North American Free Trade Agreement, and Trump's threats of new tariffs on automotive imports. Exports jumped 4.1 per cent, their biggest one-month increase since November, 2016, to a record $50.7-billion, while imports dipped 0.2 per cent. Exports of aluminum subject to the tariffs fell 7 per cent, after jumping 29 per cent in the prior three months.

Analysts, who say the damage will be much greater if Trump goes ahead with a threat to impose tariffs on autos, did not appear too anxious on Friday.

The Canadian dollar was little changed at C$1.3001, or 76.92 USA cents.

While soybean exports continued to rise in June, US shipments of automobiles, aircraft and pharmaceuticals fell. A number of Canadian refineries that had been shut down in April and May resumed production in June, cutting the demand for foreign gasoline and diesel fuel. The government reported last Friday that trade contributed 1.06 percentage points to the economy's 4.1 percent annualized growth pace in the second quarter.

As a result, Canada's trade surplus with the United States widened from $3.3 billion in May to $4.1 billion.

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