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Getting the Low-down on Four Tariff-vulnerable Canadian Export Products

Alex Carrick
Getting the Low-down on Four Tariff-vulnerable Canadian Export Products

The U.S. and Mexico have reached broad agreement on what they would like to see from a new NAFTA trading accord. The U.S. and Canada, to put it nicely, are still ‘sorting out some issues’.

2018-09-14-Canada-Export-Products-Graphic

With back-and-forth trade relations between the two countries strained at present, Canada is dealing with tariffs already imposed on its softwood lumber exports to the U.S.; tariffs recently established on its steel and aluminum exports to the U.S.; and threatened tariffs on motor vehicle and parts exports.

In response, Canada has imposed retaliatory tariffs, of equal magnitude, on steel and aluminum imports from the U.S. and there’s no telling what action the country might take if roadblocks are erected to cross-border auto sector shipments.

How important are lumber, steel, aluminum and vehicles trade to the Canadian economy? (Dairy and poultry trade is a separate subject matter, with U.S. NAFTA negotiators asking the Canadian government to make concessions with respect to ‘supply management’.)

The ten tables accompanying this article set out the past five-year histories of Canadian exports and imports in the four above-mentioned product areas, with a look at their combined totals as well.

Worth keeping in mind is that approximately three-quarters of Canada’s total exports are sold into the U.S. market, while two-thirds of Canada’s imports are drawn from American sources.

The top shaded lines in Tables 1A and 1B show that the annual dollar volume of Canadian lumber exports to the U.S. usually far exceeds the dollar volume of lumber imports from the U.S.

Table 1A establishes that about three-quarters of Canada’s total lumber exports are shipped to the U.S., but that exports of lumber to the U.S. as a percentage of total Canadian exports to the U.S. are a relatively modest 3%.

On the flip side (Table 1B), lumber imports from the U.S. to Canada are traditionally less than 1.0% of total imports from the U.S to Canada. In other words, they play a miniscule role.  

Lumber (HS* IX 44)
Table 1A: Exports
2013 2014 2015 2016 2017
Exports of lumber to the U.S.          
   (Current Canadian $s Billions) $8.434 $9.766 $11.077 $13.396 $14.023
Exports of lumber to the world          
   (Current Canadian $s Billions) $12.704 $13.969 $14.930 $17.458 $18.278
Total of all ‘goods’ exports to the U.S.          
   (Current Canadian $s Billions) $357.915 $404.711 $402.171 $394.451 $414.620
Total of all exports to the world          
   (Current Canadian $s Billions) $471.947 $526.773 $524.066 $517.116 $546.593
Exports of lumber to the U.S.          
   as % of total lumber exports 66.4% 69.9% 74.2% 76.7% 76.7%
Exports of lumber to the U.S.           
   as % of total exports to the U.S. 2.4% 2.4% 2.8% 3.4% 3.4%
Exports of lumber to the U.S.
   as % of total exports to the world 1.8% 1.9% 2.1% 2.6% 2.6%
 
Table 1B: Imports
2013 2014 2015 2016 2017
Imports of lumber from the U.S.          
   (Current Canadian $s Billions) $2.139 $2.344 $2.504 $2.461 $2.415
Imports of lumber from the world          
   (Current Canadian $s Billions) $3.267 $3.557 $3.846 $3.893 $3.888
Total of all ‘goods’ imports from the U.S.          
   (Current Canadian $s Billions) $247.796 $278.510 $285.345 $278.212 $288.298
Total of all imports from the world          
   (Current Canadian $s Billions) $475.661 $512.200 $536.152 $533.194 $561.448
Imports of lumber from the U.S.          
   as % of total lumber imports 65.5% 65.9% 65.1% 63.2% 62.1%
Imports of lumber from the U.S.           
   as % of total imports from the U.S. 0.9% 0.8% 0.9% 0.9% 0.8%
Imports of lumber from the U.S.
   as % of total imports from the world 0.4% 0.5% 0.5% 0.5% 0.4%
HS* numbers are international foreign trade product designations.
By far, the biggest sub-component of ‘lumber’ is ‘softwood lumber’.
Data source: Innovation, Science & Economic Development Canada.
Table: ConstructConnect – CanaData.

The top shaded lines in Tables 2A and 2B reveal that Canada also holds a decided advantage in the trade of aluminum with the U.S., with exports exceeding imports by a factor of three.

Almost all Canadian exports of aluminum (i.e., approaching 90%) are shipped to the U.S. But Canadian exports of aluminum to the U.S. as a percentage of all Canadian exports to the U.S. is a small figure, less than 3.0%.  

Aluminum imports into Canada from the U.S. as a percentage of total imports from the U.S. are a barely perceptible 1%.

Aluminum (HS* 76)
Table 2A: Exports
2013 2014 2015 2016 2017
Exports of aluminum to the U.S.          
   (Current Canadian $s Billions) $7.141 $8.195 $9.362 $9.248 $11.090
Exports of aluminum to the world          
   (Current Canadian $s Billions) $8.737 $9.788 $10.504 $10.703 $12.736
Total of all ‘goods’ exports to the U.S.          
   (Current Canadian $s Billions) $357.915 $404.711 $402.171 $394.451 $414.620
Total of all exports to the world          
   (Current Canadian $s Billions) $471.947 $526.773 $524.066 $517.116 $546.593
Exports of aluminum to the U.S.          
   as % of total aluminum exports 81.7% 83.7% 89.1% 86.4% 87.1%
Exports of aluminum to the U.S.           
   as % of total exports to the U.S. 2.0% 2.0% 2.3% 2.3% 2.7%
Exports of aluminum to the U.S.
   as % of total exports to the world 1.5% 1.6% 1.8% 1.8% 2.0%
 
Table 2B: Imports
2013 2014 2015 2016 2017
Imports of aluminum from the U.S.          
   (Current Canadian $s Billions) $2.927 $3.252 $3.663 $3.419 $3.563
Imports of aluminum from the world          
   (Current Canadian $s Billions) $3.966 $4.434 $5.036 $4.748 $5.056
Total of all ‘goods’ imports from the U.S.          
   (Current Canadian $s Billions) $247.796 $278.510 $285.345 $278.212 $288.298
Total of all imports from the world          
   (Current Canadian $s Billions) $475.661 $512.200 $536.152 $533.194 $561.448
Imports of aluminum from the U.S.          
   as % of total aluminum imports 73.8% 73.3% 72.7% 72.0% 70.5%
Imports of aluminum from the U.S.           
   as % of total imports from the U.S. 1.2% 1.2% 1.3% 1.2% 1.2%
Imports of aluminum from the U.S.
   as % of total imports from the world 0.6% 0.6% 0.7% 0.6% 0.6%
Data source: Innovation, Science & Economic Development Canada.
Table: ConstructConnect – CanaData.

The supply-chain balance between the two countries comes into better equilibrium in Tables 3A and 3B, for steel products. For the past three years, Canadian exports of steel to the U.S. have been a close match with steel imports from south of the border.

But again, exports of steel to the U.S. as a percentage of total Canadian exports to the U.S. (Table 3A) are a not-hugely-significant 3.0%.

Furthermore, while 85% of Canadian steel exports are sent to the U.S., Canada draws only a little more than half of its steel imports from the U.S. Canada satisfies more than 40% of its non-domestic steel demands through imports from countries other than the U.S.

Imports into Canada of steel from the U.S. as a percentage of total imports from the U.S. (Table 3B) are about 4%.

For the three products considered so far, − lumber, aluminum and steel – exports to the U.S. as a percentage of total Canadian exports to the U.S. are just under 10% and imports from the U.S. as a percentage of total Canadian imports from the U.S. are only 6%.

Just the same, those three products – lumber, steel and aluminum (e.g., in ductwork) are used extensively in construction and tariffs are going to drive up construction costs.

Steel (HS* XV 72 & 73)
Table 3A: Exports
2013 2014 2015 2016 2017
Exports of steel to the U.S.          
   (Current Canadian $s Billions) $9.957 $11.687 $11.579 $10.927 $12.869
Exports of steel to the world          
   (Current Canadian $s Billions) $11.966 $13.651 $13.561 $12.817 $15.050
Total of all ‘goods’ exports to the U.S.          
   (Current Canadian $s Billions) $357.915 $404.711 $402.171 $394.451 $414.620
Total of all exports to the world          
   (Current Canadian $s Billions) $471.947 $526.773 $524.066 $517.116 $546.593
Exports of steel to the U.S.          
   as % of total steel exports 83.2% 85.6% 85.4% 85.3% 85.5%
Exports of steel to the U.S.           
   as % of total exports to the U.S. 2.8% 2.9% 2.9% 2.8% 3.1%
Exports of steel to the U.S.
   as % of total exports to the world 2.1% 2.2% 2.2% 2.1% 2.4%
 
Table 3B: Imports
2013 2014 2015 2016 2017
Imports of steel from the U.S.          
   (Current Canadian $s Billions) $12.199 $13.038 $11.646 $10.900 $12.000
Imports of steel from the world          
   (Current Canadian $s Billions) $19.634 $22.478 $20.677 $18.934 $22.017
Total of all ‘goods’ imports from the U.S.          
   (Current Canadian $s Billions) $247.796 $278.510 $285.345 $278.212 $288.298
Total of all imports from the world          
   (Current Canadian $s Billions) $475.661 $512.200 $536.152 $533.194 $561.448
Imports of steel from the U.S.          
   as % of total steel imports 62.1% 58.0% 56.3% 57.6% 54.5%
Imports of steel from the U.S.           
   as % of total imports from the U.S. 4.9% 4.7% 4.1% 3.9% 4.2%
Imports of steel from the U.S.
   as % of total imports from the world 2.6% 2.5% 2.2% 2.0% 2.1%
Data source: Innovation, Science & Economic Development Canada.
Table: ConstructConnect – CanaData.

What happens when autos and parts are added to the mix?

Canada is running an autos and parts trade deficit with the world. But with respect to the U.S., as is shown in the top boxed-in lines of Tables 4A and 4B, Canada is in a position of surplus. (Canada’s deficit with the world, but surplus with the U.S., results from substantial imports of vehicular products from Japan, South Korea, Germany and elsewhere.)

From Table 4A, Canadian exports of autos and parts to the U.S. are over 90% of total Canadian exports of autos and parts. More important, at nearly 20%, they are a significant share of total Canadian exports to the U.S. Indeed, at between 13% and 15%, they are a significant share of Canada’s total exports to the world.

As for Canadian imports of autos and parts from the U.S. (Table 4B), they are about two-thirds of total Canadian imports of autos and parts; about one-fifth of total Canadian imports from the U.S.; and about one-tenth of total Canadian imports from the world. Those are significantly high percentages.

Autos & Parts (HS* XVII 87)
Table 4A: Exports
2013 2014 2015 2016 2017
Exports of autos & parts to the U.S.          
   (Current Canadian $s Billions) $58.264 $63.189 $73.313 $79.592 $75.365
Exports of autos & parts to the world          
   (Current Canadian $s Billions) $61.039 $66.344 $77.055 $85.149 $80.942
Total of all ‘goods’ exports to the U.S.          
   (Current Canadian $s Billions) $357.915 $404.711 $402.171 $394.451 $414.620
Total of all exports to the world          
   (Current Canadian $s Billions) $471.947 $526.773 $524.066 $517.116 $546.593
Exports of autos & parts to the U.S.          
   as % of total autos & parts exports 95.5% 95.2% 95.1% 93.5% 93.1%
Exports of autos & parts to the U.S.           
   as % of total exports to the U.S. 16.3% 15.6% 18.2% 20.2% 18.2%
Exports of autos & parts to the U.S.
   as % of total exports to the world 12.3% 12.0% 14.0% 15.4% 13.8%
 
Table 4B: Imports
2013 2014 2015 2016 2017
Imports of autos & parts from the U.S.          
   (Current Canadian $s Billions) $48.630 $51.844 $55.925 $58.811 $61.978
Imports of autos & parts from the world          
   (Current Canadian $s Billions) $73.814 $77.997 $85.372 $89.318 $96.506
Total of all ‘goods’ imports from the U.S.          
   (Current Canadian $s Billions) $247.796 $278.510 $285.345 $278.212 $288.298
Total of all imports from the world          
   (Current Canadian $s Billions) $475.661 $512.200 $536.152 $533.194 $561.448
Imports of autos & parts from the U.S.          
   as % of total autos & parts imports 65.9% 66.5% 65.5% 65.8% 64.2%
Imports of autos & parts from the U.S.           
   as % of total imports from the U.S. 19.6% 18.6% 19.6% 21.1% 21.5%
Imports of autos & parts from the U.S.
   as % of total imports from the world 10.2% 10.1% 10.4% 11.0% 11.0%
Data source: Innovation, Science & Economic Development Canada.
Table: ConstructConnect – CanaData.

Tables 5A and 5B combine the results for the four product areas – lumber, aluminum, steel and autos and parts.

From Table 5A, ‘the four’ account for 27% of total Canadian exports to the U.S. and about 20% of all Canadian exports.

On the import side (Table 5B), they make up about 27% of total Canadian imports from the U.S. and 14% of total Canadian imports from the world.

Totals of the Four (Lumber, Steel, Vehicles & Aluminum)
Table 5A: Exports
2013 2014 2015 2016 2017
Exports of ‘the four’ to the U.S.          
   (Current Canadian $s Billions) $83.796 $92.837 $105.331 $113.163 $113.347
Exports of ‘the four’ to the world          
   (Current Canadian $s Billions) $94.446 $103.752 $116.050 $126.127 $127.006
Total of all ‘goods’ exports to the U.S.          
   (Current Canadian $s Billions) $357.915 $404.711 $402.171 $394.451 $414.620
Total of all exports to the world          
   (Current Canadian $s Billions) $471.947 $526.773 $524.066 $517.116 $546.593
Exports of ‘the four’ to the U.S.          
   as % of total ‘the four’ exports 88.7% 89.5% 90.8% 89.7% 89.2%
Exports of ‘the four’ to the U.S.           
   as % of total exports to the U.S. 23.4% 22.9% 26.2% 28.7% 27.3%
Exports of ‘the four’ to the U.S.
   as % of total exports to the world 17.8% 17.6% 20.1% 21.9% 20.7%
 
Table 5B: Imports
2013 2014 2015 2016 2017
Imports of ‘the four’ from the U.S.          
   (Current Canadian $s Billions) $65.895 $70.478 $73.738 $75.591 $79.956
Imports of ‘the four’ from the world          
   (Current Canadian $s Billions) $100.681 $108.466 $114.931 $116.893 $127.467
Total of all ‘goods’ imports from the U.S.          
   (Current Canadian $s Billions) $247.796 $278.510 $285.345 $278.212 $288.298
Total of all imports from the world          
   (Current Canadian $s Billions) $475.661 $512.200 $536.152 $533.194 $561.448
Imports of ‘the four’ from the U.S.          
   as % of total ‘the four’ imports 65.4% 65.0% 64.2% 64.7% 62.7%
Imports of ‘the four’ from the U.S.           
   as % of total imports from the U.S. 26.6% 25.3% 25.8% 27.2% 27.7%
Imports of ‘the four’ from the U.S.
   as % of total imports from the world 13.9% 13.8% 13.8% 14.2% 14.2%
Data source: Innovation, Science & Economic Development Canada.
Table: ConstructConnect – CanaData.

Canada continues to have other major trade products to promote and appreciate, such as oil, natural gas, base metals and agricultural products. But having Canada-U.S. trade in lumber, aluminum, steel and perhaps even motor vehicles and parts in jeopardy is a serious matter.

Some final comments (and statistics) on the importance of Canada as an export market for the U.S. are warranted. In 2017, Canada was the number one destination for U.S. goods exports, accounting for 18% of the total. Mexico was second, with a 16% share.

China was third, with a proportion only half as large, 8%.

In Europe, the United Kingdom and Germany were the prime customers of U.S. producers, but each was at only 4% of total U.S. goods exports.

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