Canada’s trade deficit in merchandise decreased to $5.9 billion in May following a record high in April due to ongoing tariffs affecting trade with the U.S. Statistics Canada reported a 1.1% increase in exports, rebounding from an 11% decline the previous month, marking the first upturn in four months.
Exports to the U.S. dropped by 0.9% in May amidst the impact of President Donald Trump’s trade policies, with Canada’s share of total U.S.-bound exports at 68.3%, significantly lower than the 75.9% average monthly share in 2024. Meanwhile, imports fell for the third consecutive month by 1.6%, with American imports decreasing by 1.2%.
In April, Canada’s trade deficit soared to over $7 billion from $2.3 billion in March. Senior economist Shelly Kaushik from BMO noted a slight improvement in Canadian trade for May but highlighted the persistent high trade deficit’s continued impact on the economy, potentially affecting Q2 economic growth.
While exports to the U.S. declined, trade with other countries saw an increase. Canada shipped 30.1% more unwrought precious metals to countries like the UK and 13.3% more meat products to Japan. Notably, a surge in gold exports contributed to the overall export growth, while imports of motor vehicles and parts continued to decline by 5.3% in May.
Kaushik cautioned that the rise in trade with other countries, particularly in specific sectors like gold, may not be sustainable, emphasizing the need for long-term data to confirm trends. Future trade agreements between Canada and the U.S. are expected to significantly impact upcoming trade figures. Trump and Prime Minister Mark Carney are aiming to finalize a trade deal by July 21 after resuming negotiations following disputes over Canada’s digital services tax.
The impact of these trade deals and evolving trade dynamics will shape trade outcomes in the coming months, according to Kaushik.
