Canadian parts factories are taking a hit from the fall of the U.S. dollar against the Canadian loonie. Their exports to the United States are down. So shipments from more-competitive U.S. parts plants to Canada should be booming, right?
Uh, not quite.
According to data released last week by the U.S. International Trade Administration, sales of U.S. parts to Canada tumbled 33.4 percent during the first nine months of this year compared with the year-earlier period.
U.S. parts shipments to Canada totaled $15.97 billion in the first nine months of this year, down from $23.97 billion in the same period of 2006. Canadian vehicle production in the first nine months rose 1.8 percent from a year earlier to 1,969,739.
The decline in part sales only partly reflects the declining value of the U.S. dollar as the unit of measure for cross-border trade. It also reflects Canada's growing preference for auto parts imported from Mexico and Asia.
Meanwhile, U.S. American customers cut their imports of Canadian auto parts during the first nine months by 2.3 percent, to $15.21 billion.
The drop was the result of due to lower volumes at the Detroit 3's U.S. plants that use Canadian parts, as well as the 20 percent rise in the loonie against the dollar over the past 12 months.
If the price of a Canadian-made widget is set in loonies, then a rising loonie means a U.S. buyer needs to pay more greenbacks for each widget. If the buyer objects, the Canadian seller may have to cut his price.