Trade Deficits On Both Sides of Border

Financial Post reports that Canada’s trade deficit rose to record levels, raising warning flags over the country’s elevated currency and lagging productivity. The trade deficit jumped to $2.34 billion in July, the highest level since 1971, when Statistics Canada began compiling such data, with both exports and imports declining during the month.

The July shortfall—reflecting a “broad-based weakness” in economy, according to one economist—was up from a revised $1.93 billion a month earlier, and narrowly eclipsed the previous high of $2.33 billion recorded in September 2010.

Finance Minister Jim Flaherty, said “The global economy, remains frustratingly fragile. For example, growth in a number of emerging market economies is slowing, and concerns are growing about the capacity of the U.S. to balance the necessary fiscal consolidation while sustaining economic growth.”

Exports to the U.S., Canada’s biggest trading partner, fell 5% to $27.4 billion in July and imports from the U.S. were down 2.1% to $25.3 billion.

South of the boarder the U.S. manufacturing trade deficit also hit an all-time high—$63.93 billion for July 2012—according to U.S. Business and Industry Council calculations.

July’s manufactures imports of $144.87 billion were only the third highest in U.S. history, slightly lower than the $146.99 billion total in June and the $145.36 level reached in March. But July industrial exports of $80.94 billion were 9.4% below the June levels and represented the smallest monthly export total since January’s $77.15 billion. U.S. manufactures exports peaked in March at $93.67 billion.

“America’s new record manufacturing trade deficit shows that the U.S. economy still suffers major competitiveness problems, that a domestic manufacturing renaissance remains a distant and possibly receding goal,” said Alan Tonelson, research fellow with U.S. Business and Industry Council. “Without major changes in U.S. trade and manufacturing policies, further backsliding will be inevitable, and the nation’s current economic woes will be prolonged.”