The Daily — Canadian international merchandise trade: Annual review 2022 (2024)

Released:2023-05-09

In2022, the value of Canada's annual merchandise exports increased22.5% to $779.2billion, while the value of annual imports rose19.9% to $757.4billion. As a result, Canada's merchandise trade surplus with the world widened from $4.6billion in2021to $21.8billion in2022. Compared with the value of total trade (imports and exports combined, totalling $1.54trillion), the trade surplus represented about0.01% of the total trade value in2022.

To explore Canada's international merchandise trade statistics for2022in an interactive format, see "The International Trade Explorer" and the "International trade monthly interactive dashboard".

Context

The year2021was defined by strong economic recovery, including international trade, following a slowdown in the activity of several industries in Canada and elsewhere in2020during the first waves of the COVID-19pandemic. Exports of goods increased21.8% in2021, stimulated among other things by the strong recovery in economic activity in the United States and the strength of prices, while imports were up more than12%, driven by a sharp rebound in national demand. However, this rapid recovery contributed to the emergence of collateral economic effects, such as the largest increase in consumer prices in40years and significant supply chain challenges.

Early2022was marked by another major event, Russia's invasion of Ukraine, and the economic sanctions imposed on Russia by many countries in response to this attack. This event limited the global supply of goods, especially raw materials produced in large quantities in this region of the world, leading to a sharp rise in prices, most of which were already high. Since there are similarities between Canada and Russia (and to a lesser extent, Ukraine) in the raw materials produced and exported, this conflict has had a significant impact on Canada's annual export performance. In2022, total export prices rose19.5%. Import prices were also strongly affected by global inflationary pressures, increasing12.4% in2022. For historical comparison, from2000to2019, the average annual growth in prices was1.0% for exports and0.7% for imports.

The following sections provide an overview of Canada's international merchandise trade results for the products that showed variations in2022that most reflected this context.

Energy products posted the largest increase in exports in2022

Total exports rose22.5% in2022, which represented an increase of more than $142billion. More than half of this increase ($76.9billion) was driven by the surge in exports of energy products. Excluding energy products, Canada's merchandise exports rose13.2% in2022. Therefore, the share of energy products as a proportion of total exports increased significantly, rising from21.2% in2021to a peak of27.2% in2022.

The value of energy exports rose57.1% in2022, led by strong price increases. Prices for energy products had already risen by75.0% in2021compared with2020, and further increased by53.8% in2022. High demand for energy products early in2022, coupled with uncertainty surrounding the conflict in Ukraine and economic sanctions against Russia—a major producer of energy products—drove these prices to record highs in2022.

Exports of crude oil (+50.8%) contributed the most to the growth in exports of energy products in2022, largely due to strong price increases. Market prices had started to rise at the beginning of2021, driven by strong global demand following COVID-19-related restrictions that had limited the use of transportation as well as production within some energy-intensive industries. While these effects on prices seemed to dissipate in late2021, uncertainty about a possible conflict in Ukraine drove prices up in early2022. These prices reached record highs in March2022when the conflict broke out, and then in June, before falling for the last six months of the year. Many factors contributed to the decline in Canadian oil prices in the second half of the year, including the use of strategic crude oil reserves in the United States, the anticipation of a global economic slowdown, and a possible decline in demand in the context of the rapid increase in borrowing costs (interest rate increases by central banks).

In real (or volume) terms, crude oil exports rose more modestly (+1.8%) in2022. This was nevertheless an all-time high in the volume of crude oil exports, reflecting record crude oil production in Alberta in2022. Like oil production in Alberta, exports of crude oil in volume terms have almost doubled in Canada since2010.

Exports of natural gas (+85.0%) also grew in2022. Once again, price increases contributed the most to the gain. This increase in prices was again partly due to the conflict in Ukraine. Because of the sudden decrease in gas exports from Russia to many European destinations due to the economic sanctions imposed on Russia, demand for North American natural gas increased sharply in2022. American production of natural gas rose in2022, but quantities of liquified natural gas exported from the United States to Europe more than doubled year over year. Both elements resulted in lower inventories and continental supply of natural gas in North America, thereby boosting prices even more. As observed with crude oil prices, natural gas prices rose sharply in the first half of the year, then fell in the second half. However, Canadian natural gas export prices rebounded in December2022, when harsh winter conditions in the United States caused prices to soar. In real (or volume) terms, natural gas exports from Canada increased8.1% in2022.

The year2023could be another turbulent year for energy exports. The general outlook seems to point toward a slowdown in economic activity in2023, which could have a downward effect on prices because of lower demand.

Regarding natural gas, given the conflict in Ukraine, the European market is becoming increasingly attractive to natural gas producers in North America, especially the United States, which has several liquefaction plants and liquefied natural gas export terminals. However, the growth of the European market could continue to constrain natural gas inventories in North America, and thereby make North American prices more volatile. For example, low inventories could make natural gas prices more sensitive to weather events in the United States during the winter.

Exports of farm, fishing and intermediate food products: A different context for volumes and prices

Exports of farm, fishing and intermediate food products rose14.7% to a peak of $54.5billion in2022. However, when expressed in real (or volume) terms, these exports posted a second consecutive annual decline. Strength in prices more than offset the decline in quantities exported in2022.

A crop year begins in August of a given year and ends in July of the following year. However, the level of production during the crop year, which heavily depends on weather conditions, has a direct impact on the quantity of farm products exported and on the prices of these goods. The last two crop years in Canada (2021/2022and2022/2023) have yielded very different results in terms of production and exports due to changing weather conditions.

The2021/2022crop year was marked by very bad weather, which led to a significant decline in export volumes for farm products in2021. Despite this decline, annual exports were partially buoyed in2021by high inventories following strong production in2020, which supported exports in early2021. Then, low production during this crop year led to historically low levels of export volumes of farm products in early2022. However, since the most recent crop year was good, these exports increased rapidly in August2022, and significant increases were also seen in September, October and November. Despite the recovery of these exports in the fall, export volumes ended2022with a9.2% decrease.

High prices in2021and2022drove the value of these exports up for these years despite a bad crop year in2021/2022and a decline in the volumes exported. Adverse weather conditions in recent years in most agricultural regions around the world have led to challenges in supplying these agricultural products. Combined with strong global demand, this has led to a sharp increase in the prices of many important commodities such as wheat, canola and soybeans. For example, in2021, wheat export prices were18.1% higher than in2020. This price growth lasted until2022and was strongly exacerbated by Russia's invasion of Ukraine, one of the world's largest wheat producers. In2022, the price of wheat exports was42.4% higher than in2021.

Higher production in the2022/2023crop year is expected to have a positive effect on Canadian exports of farm products in early2023. Weather conditions around the world and Ukraine's ability to export its wheat will also be determining factors for the prices of farm products in2023.

Greater demand for Canadian fertilizers

Exports of metal ores and non-metallic minerals increased28.1% in2022, following an annual increase of23.1% in2021. While exports of iron ores and concentrates were responsible for the increase in2021, potash exports led the growth of these exports in2022.

Potash exports more than doubled, rising from $6.6billion in2021to $15.3billion in2022. This increase is largely a result of higher prices, although in volume terms, potash exports also rose. These advances reflect strong growth in global demand for fertilizers in2022.

One of the reasons for the greater demand for this product is the increasingly difficult weather conditions farmers around the world are facing, leading to increased use of fertilizers. Canada is one of the leading producers of one of the most important types of fertilizer, potash. Another reason for the higher demand for this product is Russia's invasion of Ukraine. Since Russia is also one of the major fertilizer-producing countries, economic sanctions have forced some countries to import fertilizers from other countries, such as Canada. For example, Bangladesh saw its imports of potash from Canada more than quadruple in2022compared with the average of the five previous years.

The production capacity of potash in Canada is large but limited. Therefore, the change in the value of these exports remains highly dependent on price fluctuations, which themselves are largely based on global demand for this fertilizer. This demand will be greatly influenced in2023—and in the years to come—by the weather conditions farmers around the world will face.

In conclusion, although the value of Canadian exports of goods rose sharply in2021(+21.8%) and2022(+22.5%), these two years were marked by never-before-seen price increases. In real (or volume) terms, total exports were up1.4% in2021and2.5% in2022, very different from annual variations expressed in nominal terms. In2022, exports in constant dollars were still below2019levels, before the onset of the COVID-19pandemic. Therefore, despite the various global events that contributed to the greater demand for Canadian raw materials in2022, the increase in the value of exports was mainly reflected in price growth, not in the quantities exported.

Imports of consumer goods peaked, driven largely by higher prices

Canadian merchandise imports rose19.9% in2022to $757.4billion, with all product sections posting increases. Of the11product sections,6posted gains of more than $10billion and accounted for more than80% of the total increase. Of these increases, imports of consumer goods were up the most. Like exports, imports were severely affected by rising prices in2022. After removing the effects of prices, imports in real (or volume) terms increased6.6%.

In2022, imports of consumer goods increased14.6% to $156.3billion, which is more than20% of total merchandise imports. In the context of high inflation, the prices of consumer goods imports contributed significantly to the increase in2022. When expressed in real (or volume) terms, imports of consumer goods were up3.2% during the year.

Imports of clothing, footwear and accessories (+38.4%) were the largest contributor to the increase in consumer goods imports in2022. After falling19.2% in2020, these imports rose8.1% in2021, which was not enough to reach the pre-pandemic level set in2019. Driven by strong demand and new inventory management strategies by retailers, these imports finally surpassed2019levels in2022.

Imports of pharmaceutical products (+11.8%) also contributed to the increase in2022. Although the value of imports of "vaccines for human medicine other than for influenza," which include COVID-19vaccines, was still high in2022, this stability in the imports of these products from2021to2022means that these imports did not contribute much to the annual variation in pharmaceutical product imports. However, medications for the treatment of COVID-19did contribute in part to the increase in imports of pharmaceutical products in2022.

Imports of consumer goods are a potential indicator of consumer demand in Canada, a particularly interesting economic driver to monitor in the context of high inflation and rising borrowing costs. Other import categories related to consumer demand in Canada are also of interest, such as communication, and audio and video equipment, which includes cellphones and televisions; computers and computer peripherals, which include tablets and laptop computers; and passenger cars and light trucks.

Imports of motor vehicles and parts returned to pre-pandemic levels

Imports of motor vehicles and parts were up20.7% to $114.8billion in2022, a level comparable to that of2019($115.3billion), the most recent pre-pandemic annual value. Although, in2022, prices for these imports posted one of the largest annual increases since these statistics have been compiled, it was the growth in import volumes that contributed the most to this gain. In volume terms, imports of motor vehicles and parts have not yet returned to2019levels, but got much closer in2022, ending up1.9% below2019levels.

While motor vehicle production worldwide was recovering following closures in response to the public health restrictions imposed during the first wave of the pandemic, this industry was hit hard by supply chain issues beginning in late2020. Despite strong global demand, many vehicle manufacturers were forced to slow production in2021due to a lack of parts, particularly semiconductor chips. As a result, both global production and Canadian imports could not return to sufficient levels to keep pace with increasing demand during this period. In2022, the industry adapted and, despite the persistence of these issues, reduced the amount of downtime and produced more vehicles, which had an impact on Canadian import data.

On the export front, exports of motor vehicles and parts were up12.5% in2022but were more than14% below2019levels. When these exports are adjusted for prices, the difference in volume terms between2019and2022levels widens to19.1%. There are several reasons for this gap, including the fact that Canadian production was more affected than production in other countries by the parts shortage in2021(export volumes of motor vehicles and parts decreased by4.1% in2021compared with2020, a year when the pandemic had a very negative impact on production). In addition, since2019, Canadian manufacturers have stopped producing more automobile models than they have gained following shifts in production plans. Finally, Canada produces motor vehicles that have become less in-demand than vehicles produced elsewhere. For example, in general, the North American demand for light trucks is higher than the demand for passenger cars, and relatively few light trucks are manufactured in Canada.

Imports of industrial machinery, equipment and parts continued to rise in2022

After increasing13.7% in2021, imports of industrial machinery, equipment and parts rose22.9% to an all-time high of $84.6billion in2022. After falling in2020, the values of these imports in2021returned to levels similar to2018and2019, and then reached new heights in2022. Even though prices contributed to this growth, imports of industrial machinery, equipment and parts still posted a significant increase in volume terms (+10.3%) in2022.

The increase in the value of imports in this product section was widespread among all product subsections in2022. While higher imports were observed within more typically traded categories, such as machinery for forestry, construction, mining, and agriculture, other categories posted considerable increases.

This was the case for other industry-specific manufacturing machinery, which rose35.4% in2022. Imports for the construction of the liquefied natural gas terminal in British Columbia were the largest contributor to the gain in this subsection. Construction of the terminal entered a new phase in late2021, which is when imports of various modules and equipment for this project began to increase. Imports for the liquefaction plant will continue in2023and will create some volatility in the monthly results.

Imports of other general-purpose machinery and equipment (+22.5%) also rose sharply in2022. With the increase in the number of wind farm projects, higher imports of equipment and parts for wind turbines contributed to the growth in imports under this subsection.

As with imports of consumer goods, imports of industrial machinery, equipment and parts are a potential indicator that can shed light on the extent of investments made in Canadian goods-producing industries. With higher interest rates, which may affect the borrowing capacity of major investors, imports within this product section will be closely monitored in2023.

In conclusion, although Canadian imports were less affected than exports by price increases, they were still subject to strong inflationary pressure. However, the increase in trade volumes was larger on the import side (+6.6%) than on the export side (+2.5%) in2022. As a result, strong domestic demand contributed more to the increase in Canada's trade activity in2022than the global events that boosted foreign demand for Canadian products. In addition, import volumes in2022finally surpassed pre-pandemic levels, which has yet to be observed for export volumes.

The record trade surplus with the United States topped the record deficit with other countries

In2022, exports to the United States rose24.8% to $595billion, an all-time high. This increase was largely due to the rise in energy exports, which jumped in2022on strong prices. Given the geographic proximity and extensive integration of the transportation systems (pipelines and railways) for these products between the two countries, nearly90% of Canadian energy exports were destined for the United States. Exports to the United States, more than one-third of which were energy products, were therefore strongly influenced by prices in2022.

Imports from the United States were up20.0% to $471billion in2022. Here too, although the contribution was smaller than for exports, energy products posted the largest increase. Imports of crude oil and refined petroleum products from the United States rose sharply in2022, mostly driven by higher prices. Imports of motor vehicles and parts also contributed to the increase, reflecting continued demand for motor vehicles and some improvement in supply chain management.

Since exports to the United States increased more than imports in2022, the trade surplus with the United States widened from $84billion in2021to $124billion in2022. This is the highest annual surplus with the United States ever recorded.

Exports to countries other than the United States rose15.4% to $184billion in2022. The three largest increases among destination countries were in Asia: Japan (+24.5%), India (+78.9%) and South Korea (+37.1%). Canadian coal exports to all these countries increased sharply and, propelled by rising prices, almost doubled in total in2022compared with2021. Potash, nickel, wheat, crude oil, pharmaceutical products and unwrought gold are some of the other products that contributed to higher Canadian exports to countries other than the United States.

Imports from countries other than the United States rose19.8% to $286billion in2022. Despite various challenges related to the COVID-19pandemic in2022, which limited the production of certain goods and the export capacity of some port terminals, China accounted for more than one-quarter of the increase in imports to Canada from countries other than the United States. The increase in imports from China in2022was generalized across several types of products. Mexico, Germany, South Korea, India and Italy also contributed to the increase in imports from countries other than the United States in2022. The imported products that posted the largest increases were clothing, footwear and accessories; pharmaceutical products; passenger cars and light trucks; and basic chemical products.

Since imports were higher than exports, the trade deficit with countries other than the United States widened from $79billion in2021to $102billion in2022, a record deficit.

Contact information

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