How shippers can tap into the economic strength of two of the world’s largest trading partners by importing and/or exporting across the U.S.-Canada border.
Worth about $628 billion annually, the trading relationship between the U.S. and Canada is the second-largest in the world (after China and the U.S.). With both countries in the midst of their own economic booms—and with the new United States-Mexico-Canada Agreement (USMCA) now in place—the opportunities are opening up for importers and exporters on both sides of the border.
In 2016, U.S. exports to Canada were $320.1 billion and imports were $307.6 billion. That year, the U.S. had a $12.5 billion trade surplus with Canada, which has historically held a trade deficit with the U.S. every year since 1985 in net trade of goods. Combined, these numbers make the trade relationship between the two countries vitally important to both nations’ success.
A force in its own right and the 11th largest export economy in the world, Canada exported a total of $364 billion in goods (and imported $388 billion) in 2016. This gap resulted in a negative trade balance of $24 billion. In 2016, Canada’s gross domestic product (GDP) was $1.54 trillion.
Canada’s top export destinations are the U.S. ($268 billion), China ($16.3 billion), Japan ($8.49 billion), Mexico ($7.83 billion), and the United Kingdom ($7.3 billion). The top import origins are the United States ($207 billion), China ($46.7 billion), Mexico ($23 billion), Germany ($12.1 billion), and Japan ($10.7B).
Top Exports and Imports
Given Canada’s population of 35.6 million people, its total $420.6 billion in 2017 exports translates to roughly $11,800 for every resident in that country. These export product groups represented the highest dollar value in Canadian global shipments during 2017:
- Mineral fuels including oil: US$84.6 billion (20.1% of total exports)
- Vehicles: $62.3 billion (14.8%)
- Machinery including computers: $32.4 billion (7.7%)
- Gems, precious metals: $18.6 billion (4.4%)
- Wood: $14.1 billion (3.3%)
- Electrical machinery, equipment: $13 billion (3.1%)
- Plastics, plastic articles: $12.6 billion (3%)
- Aluminum: $9.8 billion (2.3%)
- Aircraft, spacecraft: $9.7 billion (2.3%)
- Oil seeds: $7.9 billion (1.9%)
From January to September 2018, Canada’s imported goods were valued at $347.1 billion, with 58.4% of Canada’s total imports by value in 2017 purchased from other North American countries. The following product groups represent the highest dollar value in Canada’s import purchases in 2017, according to World’s Top Exports.
- Vehicles: US$74.3 billion (17.2% of total imports)
- Machinery including computers: $63.3 billion (14.6%)
- Electrical machinery, equipment: $42.8 billion (9.9%)
- Mineral fuels including oil: $29.7 billion (6.9%)
- Plastics, plastic articles: $16 billion (3.7%)
- Optical, technical, medical apparatus: $12.3 billion (2.8%)
- Pharmaceuticals: $11.7 billion (2.7%)
- Articles of iron or steel: $9.8 billion (2.3%)
- Gems, precious metals: $9.7 billion (2.3%)
- Furniture, bedding, lighting, signs, prefab buildings: $9.3 billion (2.1%)
Canada’s top 10 imports accounted for almost two-thirds (64.5%) of the overall value of its product purchases from other countries. Mineral fuels (including oil) posted the fastest-growing increase in value among the top 10 import categories, up 17.3% from 2016 to 2017.
Continued Positive Momentum
The second-fastest growing economy in the G7 (after the U.S.), Canada is “experiencing a pace of growth unseen for nearly two decades,” Tomos Lewis writes in Monocle. That growth is being spurred by several factors. For starters, Canadian government policy is supporting new sectors like technology, which are “flourishing in the cities across the country,” Lewis notes.
At the same time, Canada’s population continues to grow. On track to welcome nearly 1 million new immigrants by 2020, the country recently revamped its visa process for high-skilled foreign workers.
“With a year to go before Canada’s next general election,” Lewis concludes, “there is much to be positive about.”
Getting the Logistics Right
Despite their many similarities, the logistics markets in the U.S. and Canada are actually different in a number of ways. This can create issues for shippers on either side of the U.S.-Canadian border, particularly when it comes to importing and exporting goods. As a logistics expert with years of experience working on both sides of the border, DB Schenker helps shippers navigate these nuances and successfully import and/or export their products.
“Canada and the U.S. share the longest international border in the world, and a high percentage of Canada’s citizens are situated within 100 miles of that border,” says Craig Watson, Head of Land Transport, Canada from DB Schenker. “This and other factors make for an especially close, centuries-old trade relationship between the two countries. And while this has created a shipper-friendly logistics environment, there are also some key challenges that companies need to watch out for.”
To offset these challenges, shippers should take the time to research the nuances of cross-border shipping and understand the key differences between the two countries’ transportation rules and infrastructure. Armed with this information, companies can make the best possible decisions — and make sure all of the I’s are dotted and T’s crossed — before sending their goods off to customers.