US Vs Canada: The Numbers Behind the World’s Closest Trade Relationship

Whether we’re discussing the ancient merchants that traversed the legendary Silk Road, or the transfer of goods across modern border lines, trade has always been about building close relationships.

As Visual Capitalist"s Jeff Desjardins notes, there are many examples of strong and mutually-beneficial trade relationships all throughout history, but one doesn’t have to look far back to find what could be considered the closest bilateral relationship ever known: the one between the United States and Canada.

These two countries are each other’s best customers, and they share the world’s longest international border (5,525 miles long). They are both Western democracies with shared cultural heritage and similar standards of living – and each day, the two countries exchange a whopping US$1.7 billion in goods and services.

Our infographic today highlights numbers and tangible examples behind this lengthy relationship between the U.S. and Canada.

AMERICA’S BEST CUSTOMER

Despite China surpassing Canada in 2015 to become America’s largest trading partner in aggregate, the majority of Chinese trade comes in the form of imports ($462B imports vs. $115B exports). That means China is actually only the third-largest customer of American-made goods, buying about 8% of total U.S. exports in 2016.

The largest buyer of American goods is still north of the border – in fact, Canadians buy about 18% of total U.S. exports, which is more than twice that of China.

Canada is the most important international customer for 36 states – and every day the equivalent trade of all U.S./Japan happens over just one bridge (Ambassador Bridge) between Detroit, MI and Windsor, ON.

CANADA’S BEST CUSTOMER

Americans return the favor in a big way: an incredible 76% of Canadian exports are bought by Americans.

It’s estimated that 78% of Canadian exports to the U.S. are raw materials, parts and components, and services used to create other goods in the United States.

CLOSE TIES

Through many years of trade, the supply chains between the two countries have become highly integrated.

Much of the time, the U.S. is buying raw materials and intermediate goods, which get used in final products destined for domestic and global markets. Many of those even get sold directly back to Canada.

This could be buying Canadian crude to reduce reliance on OPEC, importing low cost hydro electricity during times of heavy rainfall, or using Canada’s steady supply of aluminum to make more environmentally sound vehicles.

Few countries in the world have this kind of economic interdependence – and the history, integration, and value of goods traded makes this arguably the world’s closest bilateral trade relationship.

China Imports Spike As Lunar New Year Skew Creates Biggest Trade Deficit In 3 Years

When the headline prints hit tonight on China"s trade data, offshore Yuan dipped and ripped...

As China faced its first trade deficit in 3 years (-$60bn vs +172.5bn exp)...

Obviously there is some major seaonality...

With imports exploding 44.7% YoY (and exports missing expectations dramatically +4.2% vs +14.6% exp). But it appears the economists forgot about this year"s lunar new year holiday falling in January (vs Feb last year).

As Bloomberg points out, the results were skewed because the week-long Lunar New Year holidays that shutter factories and ports across the nation occurred in February 2016 versus late January in 2017, distorting base year comparisons.

Even though the specific data point is entirely worthless, we note that Imports from U.S. rose 41% to 163.5b yuan in Jan.-Feb., General Administration of Customs says in statement.

For now it appears Bitcoin is suffering the most post-data (but this could be renewed selling pressure from this morning ahead of this weekend"s ETF decision)

India Gold Demand Just Surged 82%

After a disappointing drop in demand in 2016, Reuters reports that India"s February gold imports surged to 50 tonnes, up more than 82% from a year ago, on pent-up jeweller demand and as retail consumers ramped up purchases for weddings, provisional data from consultancy GFMS showed on Wednesday.

India"s gold imports had fallen to 27.4 tonnes in February 2016 as buyers postponed purchases in anticipation of a reduction in the import duty in the budget at the time. This February, retail demand improved due to the wedding season and as cash supplies became normal, said Bachhraj Bamalwa, a jeweller based in the eastern Indian city of Kolkata.

India"s gold imports in 2016 had fallen nearly 44 percent versus 2015 to 510.4 tonnes, the lowest level in 13 years.

"Last year was an unusual year. This year consumption and imports will rise as jewellery demand has been recovering," said Bamalwa.

The rise in imports by the world"s second-biggest consumer of the precious metal will support global prices that are trading near their highest level in 3-1/2 months, but could widen the South Asian country"s trade deficit.

"Pent-up demand on the ease of the cash crunch and wedding related demand lifted imports in February," said Sudheesh Nambiath, a senior analyst at GFMS, a division of Thomson Reuters.

Notably the India physical premium-to-spot has stabilized around 10% after spiking on Modi"s demonetization efforts.

As PiercePoints" Dave Forest notes, the demonetization effect had been weighing on India’s gold markets even into January. But the strong February import stats show that the worst may now be over, with Indian consumers making their way back to the market. The most critical point is that this increased buying is happening even as gold prices are holding relatively high — with an ounce of gold currently selling for near $1,250, not far off the $1,350 peak we saw during the past year. When gold ran from $1,050 in early 2016 up those heights, reports suggested many Indian buyers were holding off in hopes of lower rates. But this week’s news shows those holdouts may now have given up the wait, and decided to accept today’s prices as a new normal. The February buying still isn’t a barnburner — with the 50 tonnes imports during the month working out to just 600 tonnes annualized. But the year-on-year increase is encouraging.

Reuters notes, however, that imports in March could fall as a recent rally in prices has started deterring buyers.

"Consumers are struggling to adjust with higher prices. They are postponing purchases expecting a correction in prices," said Harshad Ajmera, the proprietor of JJ Gold House, a wholesaler based in Kolkata.