economy
ONE CONSTANT IN A CHANGING WORLD With the overwhelming majority of Canadian exports destined for our neighbour to the south, the US economy has an outsized influence on our domestic production.
As a relatively small (from a population perspective), open economy, Canada relies heavily on international trade. Canadian producers sell their products across the globe, and their markets are affected by economic conditions near and far. Given the global nature of high inflation followed by high interest rates, it shouldn’t come as a surprise that the value of Canadian merchandise exports decreased in 2023, by -1.4%.
As the Bank of Canada has noted of late, the economies of the US and China—two of Canada’s three largest trading partners—have been heading in different directions with the US economy being more robust than expected while the Chinese economy has been softer than anticipated. These two trends are not equal from a Canadian perspective, however, as the US accounts for 77% of Canadian exports. A strong US economy is good news for Canadian firms going forward, though as we’ll explore later on, has implications for the Bank of Canada.
WHY THE US ECONOMY MATTERS: PART I
$700
77% of total exports
4% of total exports
4% of total exports
$595 Billion $593 Billion
$600
-0.3% year over year change
$500
$400
$300
-6% year over year change
+6% year over year change
$200
$100
$36 Billion $34 Billion
$29 Billion $31 Billion
$0
UNITED STATES
EUROPEAN UNION
CHINA
DATA: CANADIAN MERCHANDISE EXPORTS TO DESTINATIONS COUNTRIES, ANNUAL SOURCE: STATISTICS CANADA. TABLE 12-10-0011-01
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