Daniel Matthews
(202) 205-5991
Daniel.Matthews@usitc.gov

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Change in 2017 from 2016:

• U.S. total exports to Canada: increased by $15.7 billion (6 percent) to $282.5 billion
• U.S. general imports from Canada: increased $22.2 billion (8 percent) to $300.0 billion
• U.S. trade deficit with Canada: increased by $6.5 billion (59 percent) to $17.5 billion

According to data from the International Monetary Fund (IMF), Canada was the world’s 10th-largest economy in 2017. The Canadian economy expanded at a faster rate in 2017 than any other G7 country—its real gross domestic product (GDP) rose by 3 percent.^[1] Canada was also the United States’ largest merchandise export market and second-largest merchandise trading partner after China, with bilateral merchandise trade totaling $582.5 billion in 2017.

U.S. Total Exports

U.S. total exports to Canada increased by $15.7 billion (6 percent) to $282.5 billion in 2017. A significant share of this growth came from U.S. exports of motor vehicles, construction and mining equipment, and natural gas. That growth more than offset declining exports of precious metals (unrefined and refined gold) and certain transportation equipment (primarily auto parts).

Table CA.1: Canada: U.S. total exports, general imports, and merchandise trade balance, by major industry/commodity sectors, 2013–17

Source: Compiled from official statistics of the U.S. Department of Commerce.
Note: Import values are based on customs value; export values are based on free along ship value, U.S. port of export. Calculations based on unrounded data. Sectors are ordered by the level of processing of the products classified therein.

       ^a Not meaningful for purposes of comparison.

U.S. exports of motor vehicles to Canada increased by $2.2 billion (8 percent) to $29 billion in 2017 due to declining Canadian production that coincided with rising demand in Canada’s passenger vehicle market. The decline in Canadian vehicle production also resulted in a decrease in demand for U.S. exports of auto parts, which declined $405 million (2 percent) to $18.3 billion in 2017. Canada’s total vehicle production that year fell by 170,867 units (7 percent) to 2.2 million units, with General Motors (GM), Ford, Fiat Chrysler, and Toyota reporting lower production levels at their Canadian operations.^[2] Canadian motor vehicle production was also affected by extended seasonal closures and a major labor strike. During the summer of 2017, GM extended previously scheduled shutdowns at its Oshawa assembly plant in order to adjust to lower seasonal demand for motor vehicles,^[3] while workers at the company’s Ingersoll plant went on strike for four weeks during the fall of 2017.^[4] While Canada’s total vehicle production declined, the country’s demand for motor vehicles rose, with total sales increasing by 90,000 units (5 percent) to a record 2 million units in 2017. Many manufacturers that produce vehicles in the United States, such as Ford and GM—as well as foreign manufacturers with U.S. operations, such as BMW, Honda, Hyundai, and Mercedes-Benz—reported increased sales in the Canadian market.^[5]

U.S. exports of construction and mining equipment to Canada increased by $1.2 billion (30 percent) to $5 billion in 2017. The increase stemmed from a combination of factors, including new mining, energy, and forestry projects, as well as a rise in infrastructure spending. Canada ranks among the top global producers of major minerals and metals^[6] and is a major export market for U.S. mining equipment manufacturers.^[7] In 2017, 126 new energy-related, forestry, and mining projects were announced throughout the country, while production started at an additional 50 projects.^[8] For example, rising energy prices and the development of new technologies such as autonomous hauling systems (self-driving dump trucks) likely led to new investments in heavy equipment by energy producers operating in Alberta’s oil sands.^[9] New and projected infrastructure spending by the Canadian government may have led to an increase in U.S. exports of construction equipment to Canada in 2017.^[10]

The increase in demand for construction equipment likely dates to 2016, when the Canadian government announced a series of measures, including the creation of the Canada Infrastructure Bank (CIB) and large increases in public infrastructure spending. The government created the CIB to attract private-sector financing for revenue-generating infrastructure projects throughout the country, including in the country’s remote mining regions.^[11] The CIB is expected to spend at least $27.4 billion (C$35 billion) on infrastructure investments over a decade, while the Canadian government has allocated $141 billion (C$180 billion)^[12] for public infrastructure projects over the next 12 years.^[13]

Rising prices were a major contributor to a $1 billion (49 percent) increase in U.S. exports of natural gas and components to Canada—in 2017, the average annual export price of U.S. natural gas rose 27 percent to $3.54 per thousand cubic feet from the previous year.^[14] In terms of volume, U.S. exports to Canada also grew in 2017, rising 19 percent to 917,087 million cubic feet.^[15] Although Canada and the United States are both major producers of natural gas, the countries share a highly integrated natural gas market due to location of resources and demand centers, as well as the availability of transportation infrastructure.^[16] New U.S. production in the Appalachian Basin region (the Marcellus Shale and the Utica Shale) is an increasingly important source of natural gas for markets in eastern Canada, while Canadian production supplies U.S. markets in the northern United States. Pipelines connecting Ontario with Michigan and New York State are now being reversed to transport natural gas from the Appalachian Basin to Ontario.^[17]

Lower shipment values for various refined forms of gold and silver led the $764 million decline (down 29 percent to $1.9 billion) in U.S. total exports of precious metals and non-numismatic coins^[18] to Canada in 2017. The United States exported less semi-manufactured silver (down by $238 million) and silver grains (down by $109 million) in 2017; Canadian consumption of silver scrap, for example, fell 38 percent to 732 metric tons.^[19] U.S. exports of gold grains (down by $165 million) and gold bullion (down by $145 million) were also lower in 2017. Canadian demand for gold weakened (4 percent to 16.7 metric tons)^[20] and domestic mined-gold output rose,^[21] which partly offset foreign-import sources of gold.

U.S. General Imports

U.S. general imports from Canada increased $22.2 billion (8 percent) to $300 billion in 2017. U.S. imports of energy-related products such as crude petroleum, petroleum products, and natural gas accounted for a significant share of this growth, as did imports of unwrought aluminum (predominantly primary and secondary unwrought aluminum). These combined increases more than offset declining U.S. imports of precious metals and certain medicinal chemicals.

Table CA.2: Canada: Leading changes in U.S. exports and imports, 2013–17

Source: Compiled from official statistics of the U.S. Department of Commerce.
Note: Import values are based on customs value; export values are based on free along ship value, U.S. port of export. Calculations based on unrounded data.

The value of U.S. imports of crude petroleum from Canada increased $13.9 billion (39 percent) to $50.1 billion in 2017, due primarily to rising prices. During 2016–17, the standard benchmark for global crude prices increased from an average of $44 per barrel to $54.^[22] In the same period, U.S. imports of crude petroleum from Canada increased from 1.18 billion barrels to 1.25 billion barrels.^[23] Although U.S. production of crude petroleum has risen with the development of new technologies such as horizontal drilling and hydraulic fracturing, U.S. imports from Canada have also grown due to differences in the types of crude oil extracted from major sources. For example, most crude oil imports from Canada are of a heavier-grade quality from bitumen deposits in Alberta and are not easily substituted in refineries by new U.S. light oil production in North Dakota and Texas.^[24] Specifically, many U.S. refineries in the Midwest and Gulf Coast regions are optimized to refine heavy crude that is imported from Canada, Venezuela, Mexico, and other sources.^[25] Canada has also benefited from declining production in Venezuela and Mexico, whose exports to the United States fell in 2017.^[26]

The trend for U.S. crude petroleum imports from Canada was largely reflected in the trend for U.S. imports of petroleum products from Canada. The latter grew $2.7 billion (33 percent) to $10.9 billion in 2017, due to rising energy prices and, to a lesser extent, rising volumes.^[27]

U.S. general imports of natural gas and components from Canada increased $2.5 billion (36 percent) to $9.4 billion in 2017. In part, the increase in import value was due to rising prices. According to data from the U.S. Energy Information Administration (EIA), the average annual import price for Canadian pipeline natural gas rose 17 percent to $2.55 per thousand cubic feet in 2017.^[28] However, there was a rise in import volumes as well. Although U.S. natural gas production has been rising, pipeline locations and constraints—such as a lack of pipeline infrastructure in certain U.S. regions—make Canadian natural gas more competitive in price in certain northern U.S. markets.^[29]

The value of U.S. general imports of unwrought aluminum (predominantly primary and secondary) increased by $1.3 billion (28 percent) to $6.1 billion in 2017. In terms of quantity, U.S. imports of unwrought aluminum from Canada rose 7 percent to 2.5 million metric tons. Rising demand from end users in the automotive and construction industries and rising aluminum prices drove the increase in imports. In 2017, U.S. demand for aluminum totaled 12.3 million metric tons, continuing an eight-year trend of consistent growth.^[30] At the same time, U.S. primary unwrought production declined 10 percent in quantity from the previous year, although production capacity increased over 8 percent from 2016 to 2017.^[31] Canadian producers’ low energy costs^[32] relative to other major global producers, comparatively modern smelting technology, and proximity to markets in the United States are the major factors driving the increase in sales of Canadian primary unwrought aluminum production.^[33]

Two key factors added to the rising value of imports. First, global prices for primary unwrought aluminum, as measured by the London Metal Exchange (LME), rose 23 percent between 2016 and 2017. Second, the U.S. Midwest Premium, a regional premium added to LME base price for primary unwrought aluminum, increased 33 percent during the same period.^[34]

U.S. general imports of motor vehicles from Canada declined $1.7 billion (4 percent) to $46 billion in 2017. This is attributed both to declining Canadian production and to a decrease in U.S. automotive sales (total motor vehicle sales in the U.S. market), which fell by 320,000 units (2 percent) to 17.23 million units in 2017.^[35]

U.S. general imports of precious metals and non-numismatic coins from Canada declined by $1.5 billion (26 percent) to $4.3 billion in 2017. The leading products that contributed to this overall decline were refined gold bullion (down by $1.0 billion) and refined silver bullion (down by $316 million). Demand dropped for these two products due to lower U.S. demand for gold (down 23.7 percent to 162 metric tons)^[36] and silver (down 14.4 percent to 5,845 metric tons).^[37] U.S. imports of Canadian Maple Leaf gold coins also declined (by $468 million) as U.S. investor attention shifted to the rising equities markets and away from holding physical gold. In fact, U.S. demand for bullion bars and coins recorded the largest decline of any consuming country in 2017 (down 58 percent to 39 metric tons), falling to the lowest level since 2007.^[38]

The overall decline of U.S. general imports of precious metals and non-numismatic coins from Canada would have been greater but for the rise in the value of imports of unrefined gold doré (up by $504 million). The Royal Canadian Mint, Canada’s only precious-metals refinery, reported refining lower bullion volumes for the first three quarters of 2017,^[39] while U.S. refineries reported increased output for 2017.^[40]

U.S. imports of medicinal chemicals from Canada declined $1.1 billion (21 percent) to $4.1 billion in 2017, with much of the decline concentrated in U.S. imports of formulated (dosage-form) products.^[41] A combination of factors likely contributed to the decline in the value of imports. One factor was the appreciation of the Canadian dollar.^[42] A second was the slowing of U.S. pharmaceutical sales amid a continued decline in the price of generic drugs,^[43] while a third was a possible shift in the import product mix from higher-value patented products to lower-cost generic products as the patents on several branded products expired.^[44] The value decline was compounded by a decline in the quantity of formulated products, likely the result of declining Canadian production. The drop in Canadian production was due to increased competition from low-cost imports^[45] and shifts in the business models and supply chains of the multinational pharmaceutical manufacturers, which may have led to fewer U.S. imports originating from Canada.^[46]

U.S. Merchandise Trade Balance

The U.S. trade deficit with Canada increased by $6.6 billion (60 percent) to $17.5 billion in 2017. The most significant trade balance shifts occurred in energy-related products, with the U.S. deficit growing by $6.5 billion (46 percent) in 2017, and in transportation equipment, which moved from a U.S. deficit of $79 million in 2016 to a surplus of $6.2 billion in 2017. Although U.S. exports of natural gas to Canada grew $1 billion in 2017, rising energy prices and an increase in U.S. import volumes of crude petroleum, petroleum products, and natural gas from Canada led to a $17.3 billion increase in the energy-related products deficit. A mix of factors contributed to the development of a trade surplus in transportation equipment, including declining Canadian production of motor vehicles, rising demand in Canada’s passenger vehicle market, and demand for equipment used in mining, energy, and forestry projects throughout Canada.