Canada’s Imports Plunge as Semiconductor Chip Shortages Disrupt Auto Trade

Canada’s trade balance swung into surplus, as imports plunged due to supply disruptions in the auto industry.

The country posted an unexpected merchandise trade surplus of $594 million (US$492 million) in April from a revised deficit of $1.35 billion a month earlier, Statistics Canada reported Tuesday in Ottawa. Economists were anticipating a deficit of $800 million for the month.

The numbers reflect a sharp drop in imports, which were down 4.7 percent. That was led by a 22 percent decline in imports of motor vehicles, reflecting production shutdowns in the auto industry because of a shortage of semiconductors.

Excluding cars, imports were down 1.3 percent.

Exports fell one percent in April, also reflecting the auto assembly disruptions.

“Production disruptions in the Canadian industry because of the shortage have been most significant in April. Production in May is expected to be slightly less severely impacted,” Statscan said in a commentary.

The Canadian dollar slipped slightly to 1.2083 to the U.S. dollar or 82.73 U.S. cents.

Ross Prusakowski, the principal economist at Export Development Canada, said the problems could last till 2022.

“It’s challenging. You’ve got the supply constraints, you’ve got the impacts of COVID-19 and you’ve got the global demand for goods, all of which now have semiconductors,” he said by phone.

Exports to the United States, Canada’s largest trading partner, rose by 1.4% in April, while imports fell by 5.2%. Canada’s trade surplus with its southern neighbour jumped to C$6.40 billion from C$4.20 billion in March.

Stephen Brown, a Canadian economist at Capital Economics, predicted gross domestic product fell by 0.8% in April.

“Export demand is improving but, given the ongoing supply disruptions, we will have to wait until the second half of the year before exports start to rise strongly again,” he said in a note to clients.

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