Canada’s Economy Caught Between Oil Windfalls and Trade Wars
US Crude Inventories Fall But Gasoline Stocks See Surprise Build Alex Kimani is a veteran finance writer, investor, engineer and researcher for Safehaven.com.
A recent Bank of CanadaMarket Participants Surveyhas flagged geopolitical and trade tensions as the biggest risks facing the Canadian economy.
Leading the downside are geopolitical risks led by the Middle East war, with 82% of respondents identifying it as the biggest risk, while 79% and 57% of respondents picked growing trade tensions and tightening global financial conditions, respectively.
The shift from trade tensions dominating headline risks to Canada’s economy amid Trump tariffs is largely attributed to the Iran war, which has disrupted global supply chains andimpactedthe shipping of oil, gas, and fertilizer through the Strait of Hormuz.
Governor Tiff Macklem has warned that persistent high energy prices resulting from these conflicts could necessitateinterest rate hikesto maintain the 2% inflation target.
However, like many oil producers, Canada is also experiencing an "oil paradox" with high oil prices driving up domestic fuel costs and inflation while simultaneously generating significant government revenue windfalls.
Canada posted its first trade surplus in six months, with the country’s merchandise trade balance swinging to a $1.78 billion surplus in March against expectations of a shortfall of $2.88 billion, while total exports rose 8.5% to $72.8 billion, the second-highest level on record.
Energy exports surged 15.6% to $17.1 billion, the highest level since September 2022, helped by a 18.9 % jump in crude oil exports thanks to a 33.1% spike in prices.
Exports of metal products increased 24.0% to a record $15.3 billion, led by a $3 billion rise in gold exports thanks to a surge in safe-haven demand.
Meanwhile, total imports fell 1.6% to $71.0 billion, driven by lower volumes of consumer goods, pharmaceuticals, and aircraft.
Related: US Crude Inventories Fall But Gasoline Stocks See Surprise Build That said, trade tensions between Canada and the United States remain a major headwind, with 82% of respondents saying easing of the tensions is the leading upside risk to Canada’s economy.
That’s significantly higher than 57% of respondents who identified a larger-than-expected fiscal stimulus as the top upside or 43% who listed decreasing geopolitical risks and higher commodity prices.
| Product | Price | Change |
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