BUSINESS

Canada Is No Longer The U.S.'s Largest Trading Partner And You Can Blame Oil Prices

11/06/2015 12:48 EST

If the Obama administration’s rejection of the Keystone XL pipeline didn’t bring this point home enough, here’s more evidence Canada is becoming less relevant to the United States: We have lost our long-standing status as the U.S.’s largest trading partner.

According to data from the U.S. Census Bureau, China overtook Canada in the first nine months of this year to become America’s number-one trading partner.

The U.S.-Chinese trade relationship was worth US$441.6 billion in the first nine months of this year, compared to US$438.1 billion traded between the U.S. and Canada.

But it’s not because Canada is selling less to the U.S. — it’s because the collapse in oil prices means what we sell to the U.S. is worth less than it used to be.

"It's completely an oil story," RBC Capital Markets senior U.S. economist Jacob Oubina told Bloomberg. "In nominal terms, yes, the trade with China overtakes Canada, but in real terms, it's very different. It's not economic activity or output. It's a price story all the way."

With oil prices down roughly 60 per cent since their peak in mid-2014, the value of Canadian exports to the U.S. is down 11.6 per cent so far this year, compared to the same period a year earlier.

But volumes are up. The U.S. imported 101.3 million barrels of Canadian oil in September, the second-highest level seen in records going back to 2010.

Still, many experts say that — with rapid growth in emerging-market economies, particularly in Asia — Canada will have to accept a different role in the global trade environment than it’s been used to.

“When we think about the United States, we have to realize where our ranking is nowadays,” HSBC Canada chief economist David Watt told the Globe and Mail.

“We are nowhere near as predominant as we used to be. We have to realize that the market share we lost to China is not coming back. The market share we lost to Mexico … is probably not coming back.”