More than a quarter of Canada’s exports and imports were lost to the COVID-19 shutdowns in April, evidence of the severe impact on international trade in what was likely the darkest month of the economic crisis.
But reopenings of businesses in key trading sectors that started in May suggest trade has already begun what could be a long recovery, economists say.
Statistics Canada reported Thursday that merchandise exports plunged nearly 30 per cent on a value basis to $32.7-billion in April, their lowest in more than a decade. Imports fell 25 per cent, to a nine-year low of $35.9-billion. With the decline of exports outpacing the reduction in imports, the merchandise trade deficit swelled to $3.3-billion from $1.5-billion in March.
“These declines, in both absolute value and percentage, are unparalleled, as monthly decreases of this magnitude have never been observed,” Statscan said.
The lockdowns aimed at containing the spread of COVID-19 began in mid-March, so April represented the first full month of data under the containment measures – an illustration of just how much of the economy was closed for business.
“With luck, April will mark the low point for goods exchanges, as some portion of the economy started reopening in May,” National Bank of Canada economists Jocelyn Paquet and Kyle Dahms wrote in a research note. “But international demand could remain weak for some time, with surging unemployment and capacity destruction likely to crimp demand for Canadian wares for a while.”
The auto sector suffered the worst of the declines, amid mass shutdowns of assembly and parts plants. Exports plunged 82 per cent, while imports were down 77 per cent. Statscan added that most North American car plants “gradually” restarted in May, “which should lead to increased trade in the coming months.”
“However, given physical-distancing restrictions, complexities surrounding restarting supply chains and low demand for new vehicles, a return to pre-COVID-19 production levels is not expected in the near term,” it cautioned.
Energy exports fell 44 per cent and imports declined 55 per cent, hit by severely limited demand and badly slumping prices.
With many retailers forced to close, consumer goods exports fell 15 per cent, while imports were down 12 per cent. But Stastcan said that imports of pharmaceutical and textile products rose in the month, driven by demand for medicines and protective face masks.
Statscan added that alcoholic beverage imports jumped 9 per cent, to a record high.
The agency said trade in services – which includes international travel and tourism – took a similar tumble in April, with exports down 21 per cent to $8.1-billion, while imports plunged 31 per cent to $7.8-billion. Imports of travel services (which reflects Canadians travelling abroad) were down 88 per cent, while travel service exports were down 54 per cent.
U.S. trade data, also released Thursday, showed that exports dropped 21 per cent in April, while imports fell 14 per cent. The trade deficit widened to US$49.4-billion, from US$42.3-billion in March.
Economists believe international trade turned a corner in May with many countries, including Canada and the United States, beginning to ease containment restrictions and reopen businesses. But they caution that the bounceback in trade will be far from immediate. The International Monetary Fund has projected that global trade volumes will shrink by 11 per cent for the year as a whole.
“Domestic and global lockdowns and social-distancing measures have not been fully removed yet. This will keep demand subdued and prevent factories from operating at full capacity. As a result, the improvement in trade statistics will be gradual and tentative,” Toronto-Dominion Bank senior economist Sohaib Shahid said in a research note. “The improvement is also likely to be uneven, especially when it comes to trade with emerging markets, most of whom are still in the midst of the crisis.”
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