Tweaking US trade deficits no concern to Canada

The potential changes to US trade balance statistics being considered by the US administration has raised eyebrows in Canada. But no matter how Trump’s administration wants to tweak the data, the US trade deficit with Canada is simply far too small to be of any meaningful concern to even the strictest adherent of mercantilist economics. The US trade deficit with Canada is much smaller than the trade deficits with other major trading partners. The new trade deficit calculations being considered by Trump’s administration actually reinforce this point. More importantly, even under those fictitious calculations, the larger US trade deficit with Canada amounts to only a trivial 0.3% of US GDP. The key event this week is the Bank of Canada policy statement. We expect the Bank to keep its policy interest rate at 0.50% and don’t anticipate much in the way of forward guidance on the rate outlook. The fourth-quarter accounts will also be released and should show that GDP grew by an annualised 1.7%quarter-on-quarter, confirming the economy’s recovery from the oil shock.