Canada’s share of US goods imports dropped to an all time low of 12.5% in 2018, even though over much of that time span the Canadian dollar was rather weak against the US dollar.

As a March 29th National Bank report illustrates, Canadian exports to the US have essentially been crowded out big time by China, and to a lesser extent, by Mexico.

In 2007 more than 16% of U.S. goods imports came from Canada, and that share plummeted to less than 13% last year.

In sharp contrast, Mexico’s and China’s share of the U.S. import market surged over the last 12 years.

Viewed from this perspective, it should not be surprising that Canada’s non-energy export products, including autos, have underperformed.

Obviously, there are complicated forces at work affecting the changing country composition of US imports, including China’s huge international trade surge and Mexico’s low wages and its industrialization process.

Of course, for Mexico there was the added export trade advantage from the original NAFTA  agreement, particularly in the field of automobiles.

It is interesting to note that one of the reasons for the shrinking influence of Canadian exports into the US is the fact that up to recently Canada has had an increasing proportion of its exports concentrated in the energy field, particularly crude oil.

In other words, what is distinctly different between the current period and a decade earlier is Canada’s growing dependence on energy exports.

As Krishen Rangasamy, the author of the Hot Chart points out, what has happened over the past decade is that Canada’s relied increasingly on energy exports to the US, and energy exports are relatively insensitive to currency values.

In other words, Canada’s increased reliance of energy exports decreased the usefulness of a weaker Canadian dollar (or devaluation) in helping to improve Canada’s trade balance.