Canada's internal merchandise trade surplus fell in June to its lowest level in more than two years, due to the ongoing softwood lumber dispute with the United States.
The debate, which is now being discussed before the World Trade Organization, drove down Canada's net exports by 0.5 per cent in June, Statisics Canada reveals.
A conference to conclude the trade argument is expected to resume in September, at which point government officials hope to restore Canada's $10-billion-per-year softwood industry.
While exports were down, imports rose by 2.1 per cent. This left an overall surplus of $3.8 billion in June, down from $4.5 billion in May, Statistics Canada reports.
Canada's trade surplus with the United States - Canada's largest trading partner - dropped to $7.2 billion in June from $7.7 billion in May.
Analysts are not surprised Canada's trade surplus has taken a tumble since the American economy is continuing to struggle from last year's recession.
That has raised concerns Canada's still buoyed economy will slow in relation to the country's largest trading partner.
Analysts say Canada has yet to feel the full brunt of the lumber issue, since the U.S. has a weakened economy.
In the midst of doom and gloom however, a brighter side evolves.
With a rising import demand Canadians are still shopping, securing the domestic side of the economy.
It has been so strong the Bank of Canada is worried the economy could trigger inflation.
For this reason interest rates have increased three times this year to the present 2.75 per cent. Analysts are divided as to whether rates will again rise in the next meeting to be held Sept. 4.
The U.S. economy has become so sluggish the Federal Reserve has warned it may drop rates below the current 1.75 per cent.
