The foreign trade positions of the U.S. and Canada offer good gauges of how the two economies are doing. Based on the latest tallies, neither economy is anywhere close to being normal.

Canada

The August 2009 reading on Canada’s merchandise trade position shows a $23.8 (CAD) billion deficit annualized. Canada usually has a monthly annualized trade surplus of +$50 to +$70 billion, which is quite different. Problems reside in three main areas and the auto sector isn’t one of them.

Year-to-date energy imports are -38.6% due to the recession in Canada through most of this year. More important, however, energy exports are -42.6%. This is a combination of slack demand from a U.S. economy in worse shape than Canada and oil and natural gas prices that were depressed in the early part of this year. Therefore, the trade surplus in energy is -45.3%.

In forestry products, exports almost always far outweigh imports, but they are -22.6% for the January to August period of this year versus the same eight months last year. The weak U.S. new homebuilding market has been the reason. Therefore, the surplus has dropped by 23.3%.

In industrial goods and materials, including metals and minerals (i.e. mining), imports are -17.2%, but exports are -31.5%. The surplus in this category is down a startling 86.7%. China and some other Asia Pacific nations have been gradually increasing their demands for resources. But much of this is coming from sources closer to home, with Australia reaping the rewards.

In auto products, both imports and exports are down (-30.7% and -36.4% respectively), leaving a deficit that is only slightly worse this year than it was last year. When U.S. demand for cars slips into reverse, it means that Canadian imports suffer. That’s because parts are imported into Canada as part of the supply chain that results in assembled vehicles being exported to the U.S.

U.S.

The U.S. goods and services trade deficit of only $-368.5 (USD) is mainly due to a cutback in imports. As the U.S. economy makes further strides in recovery, the trade deficit can be expected to exceed $-500 billion again, if not more. The U.S. economy remains dependent on foreign oil. Also, many of the goods that go into everyone’s homes come from outside the country.

As the world economy rises from the mat, there are several key factors that will impact on the trade positions of Canada and the U.S.

A new wrinkle – the value of the greenback

A new wrinkle has been introduced which may make the future much different from the past. The U.S. dollar is under assault in international currency markets. The primary reason is concern about Washington’s spending ways. Other currencies are adjusting upwards. As far as the U.S. is concerned, this will help its international sales efforts. As for other nations, they will be trying to export under the burden of their goods and services priced more expensively.