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Trade Balance Slumps to an All-time Low

Canadian Economics

By: David Ristovski

Canada’s merchandise exports fell by 10.8 per cent (month-over-month) in April. Meanwhile, imports were down 3.5 per cent. As a result, Canada’s merchandise trade deficit widened from $2.3 billion in March to $7.1 billion in April—the largest deficit on record.

  • Imports fell to $67.6 billion in April. The largest contributors to the monthly decrease were imports of motor vehicles and parts (–17.7 per cent), industrial machinery, equipment and parts (–9.5 per cent), and consumer goods (–4.2 per cent). The decline in imports was partly offset by a sharp increase in imports of metal and non-metallic mineral products (+48.8 per cent), driven by imports of unwrought gold, silver, and platinum group metals. In volume terms, total imports fell 2.9 per cent.
  • Canadian exports to the U.S. were down 15.7 per cent in April. Meanwhile, imports from the United States declined by 10.8 per cent. As a result, the merchandise trade surplus with the United States narrowed to $3.6 billion in April—the smallest surplus since December 2020.

Key Insights

U.S. tariffs dealt a heavy blow to Canadian exports in April. Following the imposition of U.S. tariffs on Canadian goods in March and the expanded measures in April targeting Canadian-made motor vehicles, exports to the U.S. fell by 15.7 per cent. The decline was driven primarily by reduced motor vehicle shipments, as Canadian manufacturers cut production in response. Additionally, consumer goods exports dropped to their lowest level since December 2023, largely driven by lower exports to the United States.

Recent trade tensions with the United States underscore the importance of Canada diversifying its export markets. In 2024, 75.9 per cent of Canada’s exports were U.S.-bound. However, trade tensions are prompting Canadian businesses to diversify. In April, exports to non-U.S. markets rose 2.9 per cent to reach a record high, driven by increased shipments to China, gold to the U.K., and potash to Brazil. Imports from non-U.S. countries also climbed 8.3 per cent to a record $29 billion, reflecting broader trade diversification.

Canada’s trade outlook is clouded by near-term uncertainty. U.S. President Donald Trump has signed an order doubling steel and aluminum tariffs to 50 per cent, potentially shutting Canadian exporters out of the U.S. market. This poses significant risks to Canada’s auto sector, which is closely tied to U.S. supply chains. Rapidly shifting U.S. trade policy is creating a cloud of uncertainty, which is eroding business confidence. Besides disrupting global trade flows, tariffs are driving shifts in consumer behavior. Businesses and households are adjusting spending patterns in response to rising costs and supply chain uncertainty. While negotiations may lead to a reprieve, the economic effects of prolonged tariffs will extend beyond trade, posing a risk to jobs and investment.

For a more detailed breakdown, check out our analysis on The True Cost of the Trump Tariffs.

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