Canadian Merchandise Trade (July 2025)

Canada's Trade Deficit Narrows in July; Exports Continue Recovery

• Canada's trade deficit narrowed from a revised $6.0 billion in June to $4.9 billion in July.
• Exports rebounded for a third consecutive month, albeit modestly (+0.9% m/m), as a jump in exports to the U.S. (+5.0% m/m) was offset by an 8.6% m/m decline to non-U.S. markets. Export growth was seen in 7 of 11 product sections, with shipments of energy products (+4.2% m/m) and motor vehicle and parts (+6.6% m/m) making the largest contributions. Lower exports of metal and non-metallic mineral products (-8.0%) partially offset July's overall increase.
• Goods imports on the other hand were down 0.8% m/m in July. The decrease was narrowly-based as imports of machinery, equipment and parts (-18.8% m/m) unwound from last month's elevated print. Otherwise, 10 of 11 product groups saw increases.
• In volume terms, merchandise exports were up 1.6% m/m while imports decreased by 0.9% m/m in June.
• Canada's merchandise trade surplus with the United States widened significantly to $6.7 billion as of July, as exports gained and imports fell.

Key Implications

• As expected, Canadian exports continue to recover from April's five-year low. The combination of rising exports and falling imports on the month should allow net trade to bounce-back after an exceptionally weak showing in the second quarter, providing a positive tailwind to total GDP growth. 
• There is still considerable uncertainty on the trade front for the quarter ahead. On the plus side, the Canadian government recently removed counter-tariffs on U.S. imports, which should aid in more positive discussions with the U.S. administration around the state of trade. On the other hand, Canadian export rotation into non-U.S. markets may not be having the same staying-power as exports abruptly shifted back to the U.S. in July. Looking ahead, we still expect Section 232 and IEEPA tariffs on Canadian exports to remain in place over the coming quarters with the USMCA renegotiations looming next year.        

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