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Canadian Auto Industry Trade Deficit Broadened $3.7 Billion
Aug 27, 2008

The Canadian automobile industry trade deficit increased to C$3.7 Billion during January-April 2008 due to sluggish growth in the exports and rising import of subcompact cars.

The data compiled by the Canadian Auto Workers (CAW) union from data given by Industry Canada and Statistics Canada revealed that trade deficit in the country for automobiles and their parts surged to C$3.7 Billion (US$ 3.64) in the initial first four months of this year. The surge in deficit was due to decline in export of finished trucks and cars, as reported by
Bloomberg.

According to CAW, the imports of automobiles and parts increased to $3.7 Billion compared to exports, widening the deficit by $1.9 Billion, almost double from the corresponding period last year. Moreover, the imports of finished buses and trucks, including their parts and bodies, fell by 17% to $23.1 Billion against $27.8 Billion while their exports dropped by 25% to $19.4 Billion against $25.9 Billion in the same period last year.

According to the industry experts, the rise in trade deficit of the Canadian automobile industry is mainly due to fall in exports of vehicles to the US amid housing crisis and high gas prices. Besides, the vehicle exports were hampered because of stoppage of work at many manufacturing units during January-April 2008 due to jobs lost.

In addition, the sub-compact car segment of the Canadian automobile market is performing splendidly this year. Majority of these cars are imported from the Asian region, as a result, the trade deficit increased. Besides, rising value of the Canadian dollar increased export costs and reduced prices for imports in the country.

CAW also disclosed that the Canadian automobile industry’s trade deficit might reach $10 Billion if the current trend continues rest of the year, indicating towards the poor future prospects of the automobile industry.

According to a Research Analyst at
RNCOS, “The trade deficit of the Canadian automobile industry is increasing at a rapid pace due to multiple antagonistic factors. Furthermore, rise in currency exchange, along with surging domestic demand for subcompact cars imported from Asia, is offsetting the trade balance and severely hampering the country’s GDP growth. Moreover, if the present situation prevails in future, then the automobile industry would fall short of investments.”

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