The initial data for the second quarter point to a sharp drop in trade that will weigh on growth for Canada and other major U.S. trading partners, says National Bank Financial Inc. (NBF).
In a research note, NBF said U.S. goods imports fell by a record 19.8% in April.
“After U.S. businesses massively front-loaded international orders in the first quarter to avoid tariffs imposed by the Trump administration, a swing back was to be expected in the second quarter. However, the reversal appears to be much more dramatic than anticipated,” it said.
Alongside the largest-ever monthly drop in imports, new data from the ISM Manufacturing Report released today indicate that trade likely didn’t rebound in May.
“The sub-index tracking new export orders came in at … a level never seen outside of recessionary periods. Meanwhile, the import index saw its third-largest monthly decline in history and stood at its lowest level since the Great Recession,” NBF said.
This sharp drop in U.S. trade will impact second-quarter economic data, it said.
For the U.S., the plunge in imports will lead to “higher-than-expected GDP growth,” NBF said, while the decline in trade will weigh on growth for certain U.S. trading partners, including Canada.
“The impact could be significant for the manufacturing sector, which has already been experiencing a decline in production and jobs for several months,” NBF said.