With crude oil prices down nearly 50% during 2015 we’ve seen the effects of lower prices across many sectors.
And now we find the U.S.’s largest trading partner has fallen victim to lower crude oil (USO, quote) prices. Trade between Canada and the U.S. totaled just over $438 billion through September. Because Canada’s largest exported product to the U.S. is crude oil it’s left the door open for China (FXI, quote) to claim the title of the largest trade partner to the U.S. with over $441 billion for the same period.
An interesting statistic - from 1985 to 2014 Canada’s exports to U.S. jumped $660.22 billion (467%) while China exported $590.43 billion (7,550%) during the same period, to U.S. government data. China’s jump seems extreme but one needs to keep in mind during this period in time China was working its way from a largely undeveloped emerging market to the second largest economy in the world.
Every where you look we find analyst looking for crude oil prices begin to recover albeit I’m in the belief that a rate hike this year will prolong the recovery of crude oil. But once crude oil begins to recover, Canada should regain its position as the U.S.’s largest trade partner.
Bottom Line: Canada’s currency is suffering as its largest export to the south remains so cheap. I’m continuing my short Canadian and long U.S. dollar position and will look to add to this position on pull backs.