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Data released on Thursday in Canada showed the trade deficit rose more than expected in April, with a dramatic collapse of almost 30% in exports, to the lowest in ten years and imports fell 25%. According to National Bank of Canada analyst Jocelyn Paquet, “with luck”, April will mark the low point for trade as the economy gradually reopened in May but it that does not mean things will get back to normal soon. 

Key Quotes:

“The measures put in place to contain the spread of the coronavirus took a heavy toll on international exchanges in April. Total trade (exports + imports) sank no less than 27.4% m/m, thanks to record pullbacks for both exports and imports. Unsurprisingly, Statistics Canada attributed these poor results to “production shutdowns in a number of manufacturing industries, falling energy prices, the closure of many retail stores and weaker demand due to physical distancing measures”. 

“The auto sector has been hit particularly hard since the beginning of the crisis. Exports in that category have sunk from C$7.4 billion in Februay to just C$1.1 billion in April due to production shutdowns. Imports suffered a similar fate.”

“With luck, April will mark the low point for trade as the economy gradually reopened in May. That does not mean things will get back to normal soon. The surge in unemployement worldwide, coupled with permanent capacity destruction, is likely to crimp international trade for some time.”