Trump’s trade measures are continuing to take their toll
The ongoing trade war with the United States pushed Canada’s merchandise trade deficit lower in May as exports to the US dipped, even despite a jump in overall exports.
Statistics Canada said the merchandise trade deficit fell to $5.9 billion and exports to the US slid by 0.9% in May – although total exports were up by 1.1%, the first time in four months they’ve risen.
The news arrives with no end in sight to the trade tussle launched by US president Donald Trump shortly after his inauguration in January. Trump said last week he was calling off trade negotiations with Canada because of a planned imposition of a digital services tax on US companies, although talks are recommencing after the Canadian government scrapped that policy.
Canada’s share of total exports headed to the US fell to 68.3% in May – one of the lowest proportions on record between the two trading partners. By comparison, Canada sent 75.9% of its exports to the US on average each month in 2024, highlighting a shift in trade flows amid strained bilateral relations.
In April, US importers rushed to stockpile Canadian goods ahead of Trump’s planned tariffs – seeing the trade deficit swell to $7.1 billion that month compared with $2.3 billion in March.
Total imports fell by 1.6% in May, slipping for the third month in a row, spurred mainly by a decline in imports of goods produced in the US.
Although trade with the US weakened, exports to other international markets increased. Canada exported 30.1% more unwrought gold, silver, and platinum group metals to countries including the United Kingdom. Meat exports to Japan rose by 13.3%.
A surge in gold shipments played a key role in driving up May’s export figures. However, imports of motor vehicles and parts continued to decline, dropping by 5.3%.
Shelly Kausik, Bank of Montreal (BMO) senior economist and vice president, economics, said the “deep shortfall” showed the continuing uncertainty gripping Canadian businesses.
“Exports are likely to face continued pressure with steel and aluminum tariffs doubling in June and little relief from a modest recovery in oil prices,” Kausik wrote. “President Trump and Prime Minister Carney are aiming to reach an agreement in the coming weeks; in the meantime, expect the challenging trade environment to continue weighing on economic activity
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