This monthly report will detail trade shifts in North America, highlight what we’re seeing in today’s dynamic trade environment, and identify what it might mean for growth going forward.
- May could prove the start of normalization for the continent. Statistics Canada indicates CAN exports increased by 1.1%, following a 10.8% decline in April. This marked the first increase in exports in the last four months.
- Exports to the US declined (-0.9%), while exports outside the US grew (+5.7%), a continuation of recent trends. Canada’s exports are now significantly less concentrated in the US than they were, with the share of exports bound for US declining from 76% in 2024, to 68% in May.
- Trade between the US and the rest of world was also more stable. US Census Bureau data shows overall imports declined by 0.1%. Despite the apparent stability, US figures may still be masking distortions. Policy rolled back in May, with tariff rates on Chinese imports declining from 145% to the current 30%. The US-UK trade deal was also agreed to, although impacts are unlikely to be significant. We estimate the full scale of UK exports impacted by the UK-US deal was roughly 4% of US imports from the UK.
- Distortions are partly due to the pace of policy vs. the pace of ships, given that journeys may have needed to reroute or cancel following a given announcement. According to route data from Maersk, cargo ships headed between key Asia-Pacific and North American ports can take roughly 40–60 days to conduct the full journey. Shipments between the UK-US can take roughly 20 days. Exports stalled as a result of April’s decisions would likely not have had time to reverse course by month’s end, assuming ships were not redirected towards other markets. Expect tangible outcomes of détente (i.e. US import growth) to materialize in later summer releases.
- On the CAN-US trade relationship, two paths forward exist. A handshake deal to make a trade deal by July 21st offers promise to maintain stability or improve circumstances, but Canada has also committed to raise counter-tariffs on steel and aluminum imports if no agreement is reached by that date (the recent imposition of TRQs on steel will not affect US imports). This could be a negotiating ploy, or could re-escalate tensions mid-summer. The recent reversal on the DST indicates a potential Canadian bias towards making a deal.
- Guessing whether peak trade volatility has passed seems a fool’s errand, but the pace of trade announcements has declined since April’s peak. Trade uncertainty has declined significantly in all three countries. Overall, for Canada, the scale of the trade shock thus far appears smaller than expected, offering upside promise for growth and investment relative to initial forecasts.
- Still, several headwinds beyond tariffs could yet temper the outlook. A promise to reimpose (or create new) country-specific tariffs on July 9th looms. The US-Vietnam deal roughly doubled its tariffs above the current 10% level, and a country-by-country approach could lead to more increases. Middle Eastern conflicts could impact shipping routes and regional growth outlooks. If IEEPA tariffs are formally removed, Section 232 tariffs may be increased, following recent US moves on steel and aluminum imports.
- Given recent volatility, it bears repeating that one month’s worth of lagged data does not address all unanswered questions within the outlook. As the summer advances, the impacts of tariffs at higher or lower levels on price rises, investment and spending will become clearer. For now, data still reflects previous turmoil, but also shows a calming in markets. Clarity around effects are not foreseen until data releases in July/August.
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