| Consensus | Consensus Range | Actual | Previous | Revised | |
| Balance | C$3.3B | C$2.2B to C$4.2B | C$0.769B | C$3.855B | C$4.201B |
| Imports - M/M | 2.2% | 0.2% | 0.1% | ||
| Imports - Y/Y | 13.4% | 9.4% | 9.6% | ||
| Exports - M/M | -2.3% | 0.4% | 0.8% | ||
| Exports - Y/Y | 21.8% | 25.2% | 25.9% |
Highlights
Canada’s merchandise trade surplus narrowed far more than expected in July, to C$769 million from an upwardly revised C$4.201 billion surplus in June, as exports dropped for the first time in six months while imports increased for the sixth consecutive month.
Exports were down 2.3 percent on the month after rising 0.8 percent in June, with decreases across 7 in 11 categories. Adjusting for the price effect, total exports were down 1.5 percent on the month.
Imports rose 2.2 percent on the month after edging up 0.1 percent in June, with gains concentrated in 6 of 11 categories. Increases were related to stronger activity as volumes were up 2.2 percent.
Looking ahead, trade tensions with the U.S. escalated sharply in August, adding uncertainty around Canada's growth and inflation outlook.
However, the Bank of Canada downplayed the overall impact on domestic growth, while signaling growing concern over inflation when it announced its decision to leave the key policy rate unchanged at 2.25 percent Wednesday.
On Aug. 22, Canada called off trade negotiations with the U.S., which responded by imposing 50 percent tariffs on around C$28 billion worth of Canadian exports. Canada is retaliating with dollar-for-dollar tariffs ranging from 15 percent to 50 percent targeting nearly C$28B in U.S. imports, scheduled to come into force Sept. 8. The Canadian government is also taking measures to support businesses and workers.
"The upside risks to inflation have increased, while new tariffs make growth prospects more uncertain," the BoC said. Still, even if the tariffs remain in place,"we don’t expect them to have a large direct impact on the overall level of economic activity," as they would hit just 5 percent or so of exports to the United States.
In July, excluding declines of 8.5 percent in metal and non-metallic mineral products and 4.4 percent in energy, the value of exports increased 0.6 percent on the month. The drop in metal and non-metallic mineral products was due to a 13.1 percent decrease in unwrought gold, silver, and platinum group metals, and their alloys. Statistics Canada cited lower purchases of Canadian-held gold by foreign residents and fewer shipments to the United States.
Among the four categories recording higher exports in July, aircraft and other transportation equipment and parts was up 34.9 percent, as aircraft soared 80.1 percent. Farm, fishing and intermediate food products also increased in July, by 5.5 percent to their highest level since March 2023.
On the import front, the monthly increase in July was led by an 11.4 percent advance in motor vehicles and parts. While auto assembly parts usually close for retooling, maintenance and holidays in July, these seasonal effects were less pronounced in North America this year, leading to a 19.8 percent surge in imports of passenger cars and light trucks.
Elsewhere, metal and non-metallic mineral products increased 9.3 percent, while energy imports fell 8.2 percent, electronic and electrical equipment and parts were down 3.3 percent, and aircraft and other transportation equipment and parts were down 8.1 percent.
Regionally, exports to the U.S. contracted 6.6 percent, the largest decline since April 2025, led by crude oil and gold. Imports from the U.S., by contrast, increased 1.8 percent, leading to a smaller surplus of C$5.9 billion, down from C$10.3 billion in June.
Exports to countries other than the U.S. rose 7.4 percent to a record high C$25.6 billion, while imports increased at a smaller rate of 2.8 percent, leading to a lower trade deficit of C$5.1 billion from C$6.1 billion in June. This was the smallest deficit since January 2021.
When adding services, Canada's total trade surplus with the world narrowed to C$1.1 billion in July from C$4.0 billion in June.
Market Consensus Before Announcement
The trade surplus is expected big again at C$3.3 billion in July with a boost from high energy prices.
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.