| Consensus | Consensus Range | Actual | Previous | Revised | |
|---|---|---|---|---|---|
| Balance | C$-5.9B | C$-8.0B to C$-4.0B | C$-5.9B | C$-7.1B | C$-7.6B |
| Imports - M/M | -1.6% | -3.5% | |||
| Imports - Y/Y | 3.2% | 3.3% | |||
| Exports - M/M | 1.1% | -10.8% | |||
| Exports - Y/Y | -3.2% | -7.0% |
Highlights
As exports recovered and imports declined, Canada's merchandise trade deficit narrowed to C$5.9 billion, as expected by forecasters in an Econoday survey, from a record C$7.6 billion in April, which was revised from an initially reported C$7.1 billion gap.
Exports were up 1.1 percent on the month. Behind the rebound, however, the impact of tariff uncertainty continues to be felt.
The first export increase in four months comes on the back of an 11.0 percent plunge in April, when the U.S. implemented tariffs on goods imports from Canada. Exports were also down 3.2 percent year-over-year.
In volumes, more relevant to real GDP, exports were up 0.7 percent, indicating that prices explained a good part of the 1.1 percent nominal increase.
Exports to the U.S. were down 0.9 percent on the month, marking a fourth consecutive decrease. It is worth noting that while the U.S. remains Canada's main export market, the share dropped to 68.3 percent in May, one of the lowest levels on record low, from a monthly average of 75.9 percent in 2024.
While exports increased in 7 of 11 product sections, they would have decreased 1.2 percent if not for a 15.1 percent surge in metal and non-metallic mineral products owing to higher gold exports, mostly to the UK. The Bank of Canada has already factored in a weakening of exports in the second quarter. The surprise would come from unexpected strength.
Imports, meanwhile, contacted 1.6 percent, a third consecutive monthly decline, including a 1.2 percent drop in imports from the U.S. The merchandise trade surplus with the U.S. was little changed at C$3.2 billion from C$3.1 billion in April.
The import decline was concentrated in 5 of 11 categories, led by a 16.8 percent drop in metal and non-metallic mineral products. Feeling the impact of trade tensions and business uncertainty, imports of motor vehicles and parts were down 5.3 percent in May. Cars and light trucks plunged 9.7 percent to their lowest level in more than two years after three consecutive monthly increases. By contrast, consumer goods imports increased 4.3 percent. Import volumes contracted 0.6 percent.
Canada posted a trade deficit of C$9.1 billion in May with countries other than the U.S., narrowing from C$10.7 billion in April.
On the services front, exports were down 0.2 percent in May while imports contracted 1.8 percent.
The combined international trade deficit in goods and services narrowed to C$6.6 billion in May from C$8.0 billion in April.
U.S. President Donald Trump abruptly ended tariff negotiations with Canada last week in opposition to the Digital Service Tax (DST) that would have levied three percent on revenue from Canadian users. The DST, voted in 2024 and set to take effect June 30, would have impacted giants like Amazon, Google, Meta, Uber and Airbnb. Canada rescinded the DST in response to Trump's decision to stop discussions, and negotiations resumed June 30, with Prime Minister Mark Carney targeting the July 21 deadline that had initially been agreed upon.
Exports were up 1.1 percent on the month. Behind the rebound, however, the impact of tariff uncertainty continues to be felt.
The first export increase in four months comes on the back of an 11.0 percent plunge in April, when the U.S. implemented tariffs on goods imports from Canada. Exports were also down 3.2 percent year-over-year.
In volumes, more relevant to real GDP, exports were up 0.7 percent, indicating that prices explained a good part of the 1.1 percent nominal increase.
Exports to the U.S. were down 0.9 percent on the month, marking a fourth consecutive decrease. It is worth noting that while the U.S. remains Canada's main export market, the share dropped to 68.3 percent in May, one of the lowest levels on record low, from a monthly average of 75.9 percent in 2024.
While exports increased in 7 of 11 product sections, they would have decreased 1.2 percent if not for a 15.1 percent surge in metal and non-metallic mineral products owing to higher gold exports, mostly to the UK. The Bank of Canada has already factored in a weakening of exports in the second quarter. The surprise would come from unexpected strength.
Imports, meanwhile, contacted 1.6 percent, a third consecutive monthly decline, including a 1.2 percent drop in imports from the U.S. The merchandise trade surplus with the U.S. was little changed at C$3.2 billion from C$3.1 billion in April.
The import decline was concentrated in 5 of 11 categories, led by a 16.8 percent drop in metal and non-metallic mineral products. Feeling the impact of trade tensions and business uncertainty, imports of motor vehicles and parts were down 5.3 percent in May. Cars and light trucks plunged 9.7 percent to their lowest level in more than two years after three consecutive monthly increases. By contrast, consumer goods imports increased 4.3 percent. Import volumes contracted 0.6 percent.
Canada posted a trade deficit of C$9.1 billion in May with countries other than the U.S., narrowing from C$10.7 billion in April.
On the services front, exports were down 0.2 percent in May while imports contracted 1.8 percent.
The combined international trade deficit in goods and services narrowed to C$6.6 billion in May from C$8.0 billion in April.
U.S. President Donald Trump abruptly ended tariff negotiations with Canada last week in opposition to the Digital Service Tax (DST) that would have levied three percent on revenue from Canadian users. The DST, voted in 2024 and set to take effect June 30, would have impacted giants like Amazon, Google, Meta, Uber and Airbnb. Canada rescinded the DST in response to Trump's decision to stop discussions, and negotiations resumed June 30, with Prime Minister Mark Carney targeting the July 21 deadline that had initially been agreed upon.
Market Consensus Before Announcement
Forecasters expect the trade balance in deficit again at C$5.9 billion in May after a surprisingly large shortfall of C$7.1 billion in April.
Definition
The merchandise trade balance measures the difference between imports and exports of goods. The level of the international trade balance, as well as changes in exports and imports, indicate trends in foreign trade and can offer a guide to an economy's competitiveness. Nominal data are supplied with regards to principal trading partners and product classification.
Description
Changes in the level of imports and exports, along with the difference between the two (the trade balance) are a valuable gauge of economic trends here and abroad. While these trade figures can directly impact all financial markets, they primarily affect currency values in foreign exchange markets. This is particularly true for Canada which relies on exports and particularly those to the U.S. for growth. It should be noted that this report focuses solely on goods trade - it leaves services trade for the quarterly national accounts and balance of payments reports.
Imports indicate demand for foreign goods while exports show the demand for Canadian goods in the U.S. and elsewhere. The Canadian dollar is particularly sensitive to changes in its trade balance with the U.S. For the most part, Canada's trade balance is in surplus thanks to its exports to the U.S. Both the nominal export and import values are split into volume (real) and price components. This permits trade data to be analyzed for both changes in trade patterns as well as changing prices. This has been particularly important of late given energy price volatility and the impact on Canada's merchandise shipments. A word of caution -- the data are subject to large monthly revisions. Therefore, it can be misleading to form opinions on the basis of one month's data.
The bond market is sensitive to the risk of importing inflation. This report gives a breakdown of trade with major countries so it can be instructive for investors who are interested in diversifying globally. For example, a trend of accelerating exports to a particular country might signal economic strength and investment opportunities in that country.
Imports indicate demand for foreign goods while exports show the demand for Canadian goods in the U.S. and elsewhere. The Canadian dollar is particularly sensitive to changes in its trade balance with the U.S. For the most part, Canada's trade balance is in surplus thanks to its exports to the U.S. Both the nominal export and import values are split into volume (real) and price components. This permits trade data to be analyzed for both changes in trade patterns as well as changing prices. This has been particularly important of late given energy price volatility and the impact on Canada's merchandise shipments. A word of caution -- the data are subject to large monthly revisions. Therefore, it can be misleading to form opinions on the basis of one month's data.
The bond market is sensitive to the risk of importing inflation. This report gives a breakdown of trade with major countries so it can be instructive for investors who are interested in diversifying globally. For example, a trend of accelerating exports to a particular country might signal economic strength and investment opportunities in that country.
