Canadian Merchandise Trade (August 2025)

Canada's Trade Deficit Widens in August, Progress on Trade Recovery Temporarily Stalls

• Canada's trade deficit widened from a revised $3.8 billion in July to $6.3 billion in August.
• Exports in August pulled back 3% month-on-month (m/m) after three consecutive monthly gains. The contraction was driven by both a fall in exports to the U.S. (-3.4% m/m) and to non-U.S. markets (-2.0% m/m). Compositionally, 8 of 11 product categories fell, led by the highly-volatile exports of unwrought gold to the U.S. (-11.8% m/m). Exports of industrial machinery, equipment and parts (-9.5% m/m) and forestry products (-10.1% m/m) were also major detractors.
• Goods imports on the other hand were up 0.9% m/m in August, but also heavily influenced by movements in unwrought gold, which pushed imports of metal and non-metallic minerals up 24.2% m/m. Outside of this, 6 of 11 product groups saw decreases on the month, with energy exports (-12.8% m/m) providing the biggest counterforce.
• In volume terms, merchandise exports were down 2.8% m/m while imports also decreased, albeit by a smaller 0.3% m/m.
• Canada's merchandise trade surplus with the United States narrowed by $1 billion to $6.4 billion in August.

Key Implications

• Canada's export-gaining streak reversed course in August wiping out most of the progress we've seen since April. With two months of data in the quarter, and despite a weak month for exports, net trade is still expected to make a modest contribution to Q3 GDP growth after an exceptionally weak showing the quarter prior. There is still considerable uncertainty on the trade front in the near-term but we believe that the peak negative impacts from tariffs are in the rearview mirror. 
• Prime Minister Mark Carney heads to the White House today to discuss the current state of trade. Tariffs are likely to be at the top of the agenda, but whether we see any further relief is anyone's guess. Looking to next year, the USMCA review is set to dominate the trade agenda, potentially bringing with it another layer of uncertainty.        

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