Busch: Trade Goldilocks — Canada, US

Today, China, Canada and the US all released their monthly trade dataand there were some surprises.

First, China’s trade surplus narrowed from $27.2 billion in October to $22.9 billion in November. However, it did beat estimates of a drop to $21.2 billion. Chinese exports rose 34.9% to a record $153.3 billion and imports rose 37.7% to $130.4 billion. The United States accounts for $16.7 billion or 73% of the trade surplus. This fact will be further fueling momentum within Congress to bring a trade currency bill up for a vote in 2011.

Expect the rhetoric to soar prior to President Hu Jintao’s visit to the US in January.

In Canada, the new trend of deficits continued in November as they posted C1.7 billion in trade red ink. This is the sixth straight month of trade deficits as trade has sunk due to a strengthening currency and weak developed market demand for its exports. The surplus with the United States narrowed to its lowest level in 18 years. The expectations were for a C2.1 billion drop, but exports of copper and precious metals rose to a record via demand from China. Metal and alloy shipments soared 17.8% and underscores emerging market demand importance to Canada.


For October, the United States had a lower than expected trade deficit as the weakening US dollar helped increase demand for exports and reduce imports.

Imports dropped 0.5% to $197.4 billion while exports rose 3.2% to $158.7 billion.

According to the US, the trade gap with China in October fell to $25.52 billion from $27.83 billion in September. In the third quarter, the trade gap reduced US GDP growth by 1.75 percentage points. The best news for improving the US trade deficit came from the US Commerce Department this week as they want to relax technology exports with military uses. The bad news is that if Congress enacts a trade sanction bill on the Chinese currency, trade volumes are likely to drop overall.

The global growth story remains a tale of porridges. Emerging markets, especially China, remain too hot with tightening measures being enacted. Developed markets, especially Europe, remain too cold with the ECB not easing enough and austerity measures likely to cap growth. The United States and Canada appear to be just right as growth is trending higher and employment growth is set to expand in 2011. However, the Congressional trade bears may just catch the home invader this time.

Andrew B. BuschDirector, Global Currency and Public Policy Strategist at BMO Capital Markets, a recognized expert on the world financial markets and how these markets are impacted by political events, and a frequent CNBC contributor. You can comment on his piece and reach him hereand you can follow him on Twitter at http://twitter.com/abusch.