Canada’s Goods Trade Deficit Widens on Machinery Imports

Shipping containers at the Ray-Mont Logistics facility in the Port of Prince Rupert in Prince Rupert, British Columbia, Canada, on Wednesday, July 16, 2025. The Port of Prince Rupert is the closest North American West Coast port to Asia and has the deepest natural harbor in North America. Photo by James MacDonald /Bloomberg

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(Bloomberg) — Canada’s merchandise trade deficit reached a record high in the second quarter, with June’s gap between exports and imports expanding.

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The country’s trade shortfall with the world widened to C$5.9 billion ($4.3 billion) in June, from C$5.5 billion in May, according to Statistics Canada data Tuesday. That’s slightly lower than the median projection of a C$6.3 billion deficit in a Bloomberg survey of economists.

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Total imports grew 1.4% in June, the first increase in four months. An inbound shipment from the US of high-value equipment for an oil project off the Newfoundland coast led the increase. But excluding the industrial machinery product category, total imports were down 1.9%.

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Total exports rose 0.9% in June, the second consecutive monthly increase. But higher prices for crude oil and refined petroleum were responsible for most of that growth. In volume terms, total exports were down 0.4%, while imports were up 1.5%.

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Canada’s quarterly trade deficit hit C$19 billion in the second quarter, from C$388 million during the first three months of this year. Exports fell 12.8% on a quarterly basis, led by energy products, cars and parts and consumer goods.

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While the Canadian economy has been resilient in the face of President Donald Trump’s tariffs, its US-reliant trade sector is among the hardest hit. The Trump administration’s sectoral levies on auto, steel and aluminum cratered demand for the Canadian-made products in the US.

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Canada’s export weakness has been driven by declining US imports. Data released in the US at the same time on Tuesday showed that country’s trade deficit narrowed in June to the tightest since September 2023 as companies scaled back on imports after a massive surge earlier in the year.

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The Statistics Canada data showed the northern nation’s goods trade surplus with the US widened to C$3.9 billion, from C$3.6 billion. Exports to the US in June rose 3.1% but compared to a year ago, shipments were 12.5% lower.

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“While trade flows should stabilize in the months ahead, the level of trade will remain lower than it was previously due to ongoing US tariff policy and related uncertainty,” Andrew Grantham, economist at Canadian Imperial Bank of Commerce, said in a report to investors.

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Thomas Ryan, economist at Capital Economics, said Canada’s trade deficit remains wide and is likely to persist, as exporters continue to face tariffs and trade uncertainty. 

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“Export volumes may see a temporary boost in July, much like earlier this year when looming tariff changes triggered some front-running,” he said in a report to investors. “However, forward-looking data suggests export volumes will stay weak through the rest of the year.”

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Imports of cars and parts were up 2.9% in June, after two straight monthly declines. But higher shipments from Mexico contributed most to the increase and helped offset decreases of lower imports for engines and parts, which were down due to Canada’s tariff-hit auto production.

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Exports of vehicles and parts dropped 4.2% in June, with passenger cars and light trucks plunging 8.9% and dropping below the C$4 billion mark for the first time since November 2022.

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Exports of metal and non-metallic mineral products fell 3.4%, mainly driven by a drop in unwrought gold exports. Unwrought aluminum as well as iron and steel products slid more than 11%.

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—With assistance from Mario Baker Ramirez.

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(Adds detail on second-quarter trade deficit, comment from economists starting in paragraph five.)

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