Canada increases trade with United States, but trade deficit widens

Posted April 06, 2018

The goods trade deficit was the highest since July 2008 and the surplus on services was the lowest since December 2012.Economists polled by Reuters had forecast the trade gap widening to $56.8 billion in February.

The broadening gap comes as President Donald Trump pursues an increasingly fraught battle with the world's largest economies to right the yawning USA trade imbalance, sparking fears of a trade war.

That reflected payments made to broadcast the 2018 Olympic Games, the Commerce Department said.

The increased deficit came as imports rose 1.9% to $48.6 billion, boosted by imports of energy products.

Imports were up by 1.9 per cent, while exports rose by just 0.4 per cent.

U.S. trade deficit showing no signs of improvement and frankly as a net importing nation, like the United Kingdom, will not be benefitting from any Dollars weakness.

The report showed that politically sensitive trade deficit with China narrowed to USD34.7 billion in February from USD35.5 billion in January.

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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. The US typically runs a deficit in merchandise trade and a surplus in services.

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

A decade of steady job growth and rising incomes has driven stiff demand among consumers and industry in the world's largest economy. The White House is seeking to cut US$100 billion, or about 25 per cent, from the annual deficit with China.

The WTO circulated the request for consultation to members on Thursday, launching a discussion period before the complaint heads to formal dispute settlement process.

The two nations, along with Mexico, are racing to wrap up negotiations to revamp the North American Free Trade Agreement by month's end, before upcoming United States and Mexican elections.

Economists say focusing on deficits, rather than total trade, is misplaced.