The largest trading partnership in the world is

The largest trading partnership in the world is being tested

Canada falling behind Mexico as America’s No. 1 partner

Canada and the United States have traditionally enjoyed the largest trading partnership in the world, but these days that relationship is being tested, says a new report from BMO Capital Markets.

After the disruptions of the pandemic, globalization took a back seat to “reshoring, near-shoring and friend-shoring” as countries, particularly the United States, looked to lock down supply chains.

Both Canada and Mexico have benefitted from this trend, but mostly Mexico, say BMO economists Michael Gregory and Shelly Kaushik.

Trade between Canada and the United States totalled $920 billion in the year ending in the first quarter of 2024, or an average of $2.5 billion in trade crossing the border every day.

Two-way trade between the United States and Mexico totalled $905 billion, and is on track to surpass Canada sometime this year, they said.

This isn’t the first time.

According to U.S. Census Bureau data, two-way trade between Mexico and the U.S. hit a record high of $5.3 trillion in 2022, as the southern country usurped Canada as America’s top trading partner.

The United States’ trade deficit with Mexico, the amount by which imports exceeds the value of exports, is also much larger than with Canada.

Mexico’s $167 billion deficit compared to Canada’s $38 billion “is the largest it has ever been (partly mirroring a shrinking trade shortfall with China, which is raising eyebrows in Washington,” said the report.

Trade between Canada and the United States in goods was almost $780 billion in this past year, with services at about $140 billion. That’s a goods trade deficit of about $70 billion and a services trade surplus of $32 billion.