Canada's economic situation worsened in the second quarter, resulting in a record current account deficit driven by the U.S. trade war and declining exports.
Record Current Account Deficit
Statistics Canada reported that the current account deficit widened to C$21.16 billion ($15.4 billion) in the April-June period, the largest gap since the early 1980s. This is a significant increase from the C$1.32 billion deficit in the first quarter when many U.S. buyers stocked up ahead of tariffs.
Connection to U.S. GDP Growth
A revised release from the Bureau of Economic Analysis indicates U.S. GDP growth at an annualized pace of 3.3%. Meanwhile, Canada’s export performance has fallen to 2021 levels, with GDP expected to contract at an annualized rate of −0.7% for the second quarter.
Trade Negotiations with the U.S.
Trade Minister Dominic LeBlanc reported progress in negotiations with the U.S. following his meeting with U.S. Commerce Secretary Howard Lutnick. Technical discussions moving forward will be handled by Canada's Ambassador to the U.S., Kirsten Hillman, alongside U.S. Trade Representative Jamieson Greer.
The situation in Canada's external accounts illustrates the impact of trade negotiations and tariffs on the country's economic condition. Progress in U.S. negotiations could have a positive influence on the future economic development of Canada.
