The Global Economy: Top Commodities for the US & Canada
The global economy is as interesting as it is complicated. There are a host of factors that influence how not only nations but also people around the world do business together. Some factors include trading in the form of imports and exports and fluctuations in commodity prices, consumer demand, environmental factors, and inflation that can impact trade balances. Nations, companies, and individuals depend on trading commodities and services within their area and beyond. Hence, it is always interesting to take a closer peek at what commodities are the strongest in different regions of our world.
The US and Canada have an important trading relationship and also hold valuable places in the global economy. Today's post is focused on commodity trading statistics in the US and Canada. It will also include an overview of market performance based on the international trade imports and exports in each respective country, highlighting the top commodity in trade and benefits in the global economy.
What Is A Commodity?
A commodity is typically a tangible or primary good harvested, sourced, produced, or manufactured. Commodities can be raw goods such as crude oil, metal, grain, lumber, or any other goods harvested or mined. Manufactured commodities like textiles, machinery, or other tangible products are essential in consumers' daily lives. Whatever the tangible good, commodities are often highly sought after by regions unable to produce them or regions that can and want to share them with the larger global economy.
The global economy is reliant on trade. Each country's Gross Domestic Product (GDP) can be impacted positively or negatively depending on trade. A healthy GDP usually indicates a healthy economy. The global trade value amounted to $32 trillion in 2022, as mentioned by The United Nations Conference on Trade and Development. International trade enhances relationships among countries by expanding markets, contributing to higher GDP and increased revenue, production efficiency, specialization, and overall a prosperous global economy.
Canada Trade Market Overview
In December 2022, Canada saw trade increases. According to Global Affairs Canada “on an annual basis, goods exports were up 22.1%, led by energy products, while imports were up 19.8%. Total services exports gained 14.9%, with all four sectors increasing, while imports services rose 22.2%, led by a 221.3% increase in travel services imports.”
Although the ongoing pandemic and other issues impacted economies globally, the Canadian economy rebounded. In 2021 Canada's real GDP rose by 4.5% and continued to grow steadily in the first half of 2022, as stated by The International Monetary Fund (IMF). This further highlights that the high inflation rate in June of 8.1% led to considerable increases in commodity prices, supply-chain bottlenecks, rapid domestic recovery, and tightening labor markets. Statistics Canada indicated that the Consumer Price Index (CPI) rose 6.3% in December 2022.
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Global Affairs Canada provided more insight into the value of the Canadian dollar. In December 2022, they stated that the Canadian dollar depreciated 1.1% against the US dollar, dropping to 73.6 cents US. This is the third depreciation in the last four months as the Canadian dollar has dropped 3.8 cents US in this period (as many transactions are completed in US dollars), increasing Canadian trade values. The Consumer Price Index (CPI) is Canada's most widely used form of measuring inflation. Stats Canada indicated that the CPI rose 6.8% year over year in November 2022, followed by a further increase of 6.9% in October.
The top commodities imported and exported in Canada were highlighted by The Observatory of Economic Complexity (OEC);
Canada's top imports in November 2022 were;
- Cars
- Delivery trucks
- Motor vehicles (parts and accessories)
- Refined petroleum
Canada's top exports in November 2022 were;
- Crude petroleum
- Cars
- Petroleum gas
- Refined petroleum
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The United States Trade Market
The US economy is the largest globally by nominal GDP. The US Department of the Treasury stated, "Real GDP rose 2.6% at an annual rate in the advance estimate of third-quarter economic activity. The quarterly gain returned the economy to positive, year-to-date growth. The expansion was propelled primarily by a strong contribution from net exports—particularly trade in goods."
In 2022, The US Bureau of Labor Statistics said that in November, import prices in the US decreased by 0.6%, caused by the lower nonfuel and fuel prices. They further stipulate that the prices for US exports fell 0.3% in November, and lower nonagricultural prices more than offset higher agricultural costs.
The United States Census Bureau mentioned the US monthly international trade deficit increased in December 2022. The deficit increased from $61.0 billion in November to $67.4 billion in December as imports increased and exports decreased. They further state that the goods deficit increased by $7.4 billion in December to $90.6 billion. The services surplus increased by $1.0 billion in December to $23.2 billion.
Regarding inflation, November 2022 saw prices increase by 7.1% compared to November 2021; Statista also indicated that the annual inflation rate in the US increased from 3.2% in 2011 to 8.3% in 2022.
Overall, inflation rates are rising globally, not just within the US borders. Let's go into further detail about the imports and exports for the US in 2022.
OEC has provided detailed information regarding the top US imports and exports, which include;
The top imports in the US in November 2022 were;
- Broadcasting equipment
- Cars
- Computers
- Crude petroleum
- Packaged medicaments
The top exports in the US in November 2022 were;
- Cars
- Crude petroleum
- Petroleum gas
- Refined petroleum
Trade Between Canada And The US
The US Department of State highlighted that countries like the US and Canada share the world's longest international border and trade nearly $2.6 billion daily in goods and services. This trade partnership is an example of countries becoming interdependent, meaning nations have a better chance of prospering with imports or exports from neighboring countries.
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Shared geography, common language, and similar interests are reasons behind the solid trade relationship. However, another growth factor was the various Free Trade Agreements shared between the two nations.
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Free Trade Agreements (FTAs) can support the overall stability of the global economy and help with fair, profitable, and enriching international trade. According to the Government of Canada indicators, Canada's FTAs cover 61% of the world's GDP and open markets to 1.5 billion consumers worldwide.
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One of the most important of these agreements includes The United States-Mexico-Canada Agreement (USMCA), which according to The Office of the United States Trade Representative, entered into force on July 1, 2020, and substituted the North America Free Trade Agreement (NAFTA). Although a border separates the US and Canada, Free Trade Agreements like USMCA have helped to reduce barriers, thus allowing the US and Canada to provide support, goods, and services to their respective economies.
Considering the strong trade relationship between Canada and the US, companies looking to import into the US or Canada would have to understand the fundamental aspects of each import and the laws and regulations for importing compliantly. Speak with a Trade Advisor today to learn how your business can seamlessly import commodities across borders.
