RBC Cites Some "Better News" In Canada's May Trade Data

10:14 AM EDT, 07/03/2025 (MT Newswires) -- RBC on Thursday noted some "better news" in Canada's May trade data, including reporting from the U.S. Census Bureau.

RBC noted the Canadian goods trade deficit narrowed in May after spiking to a record high in April. This after exports had risen substantially earlier in the year as businesses stocked up on inventories, but plunged 11% in April when broad based U.S. tariffs kicked in before edging up 1.1% in May.

But RBC also noted the monthly international trade data is being heavily distorted as exporters and importers adjust the timing of trade around U.S. tariff announcements -- both threatened and actually imposed.

RBC said the "better news" in the May data is reporting from the U.S. Census Bureau, shows that about 91% of Canadian exports to the U.S. crossed the border duty-free, consistent with the view that the exemption for CUSMA/USMCA-compliant trade from blanket U.S. tariffs imposed in March is working effectively. While certain products like Canadian steel, aluminum, and non-U.S. content in finished motor vehicles still face specific tariffs, most Canadian exports appeared to continue to benefit from duty-free access in May, the bank added.

RBC noted total U.S. tariff revenues collected continued to rise in May -- but largely, reportedly, from regions outside of Canada. The average effective U.S. tariff rate on imports from all regions rose to 8.7% from 7% in April, but the rate on imports from Canada actually edged lower to 1.9% from 2.3% in April -- and remains among the lowest of U.S. trading partners. Larger tariff hike increases were reported on imports from Korea (14.1%), Japan (14%), and China (45.6%) in May

"We," RBC said, "continue to expect that current rules, if maintained as currently in place, would leave Canada with the lowest tariff rate of any major U.S. trade partner -- putting Canadian exporters in a stronger relative position to compete for U.S. import market share than other countries. The concern remains, though, that U.S. tariff hikes have been so large, and uncertainty so high surrounding their announcements, that US economic growth will slow with negative implications for close U.S. trade partners like Canada."

RBC noted separately reported U.S. employment data this morning was mixed, but with further signs of softening in the heavily trade-exposed manufacturing sector where ties with the Canadian economy are closest.

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