Canada’s foreign trade position continues to flounder, according to the latest numbers from Statistics Canada. Since the onset of the recession in fall 2008, the nation’s merchandise trade account has been registering as many small deficits as small surpluses. The balance has been in minor deficit for the past two months. Prior to fall 2008, it was nothing but large surpluses.

The Canadian economy is accustomed to recording a goods trade surplus of at least $50 billion (CDN) annualized. It’s a mix of factors that is causing the change in pattern. Exports of precious metals – in the form of gold coins, for example – have been performing well. The fact that the world price of gold has been hovering near an all-time high has been the major contributing factor. Furthermore, Canadian exports of autos and parts are double their January 2009 level.

Forestry exports, however, are well below normal as continuing weakness in the U.S. housing market limits demand for Canadian lumber. Nor is the U.S. importing as much natural gas as in the past, due to new finds at home and industrial activity levels remaining far below capacity. Furthermore, imports from Europe have been climbing, due to the drop in value of the euro.

Growth rates in China and Southeast Asia also warrant close watching. Those countries account for much of the demand for Canada’s raw materials such as iron ore, coal and potash. So far, emerging nations have continued to grow at rapid rates. But property price bubbles are an ongoing threat to prosperity. Therefore, Asian central bankers are trying to rein in credit.

Looking south, the U.S. traditionally runs a sizable foreign trade deficit in goods plus services. However, this dropped from $800 billion (USD) annualized before the recession to only $300 billion in spring 2009. Over the past 12 months, with the improvement in U.S. national output, the trade deficit has been creeping back up again to stand at -$507 billion annualized in May.

There may be more trouble ahead. The sovereign debt problems across the Atlantic have been causing a significant currency effect. While greater government austerity measures throughout the region have reduced expectations for growth, the lower-valued euro has provided a big boost to the exports of Germany and some of its neighbours. Luxury brand automobiles, engineering services, precision tools and industrial equipment are all finding willing foreign purchasers.

The upward value adjustment of China’s yuan may cut into that nation’s exports. However, it is still not clear to what degree the yuan will be allowed to float freely. Other currencies in the region, such as the South Korean won and the Taiwanese dollar, will be carried upward as well.