Canada’s merchandise trade imbalance increased dramatically in August to C$6.32 billion ($4.53 billion) as exports decreased more sharply than imports, according to Statistics Canada data released on Tuesday.
The statistics are a setback for the country’s trade stance, as weakening demand and US tariffs continue to put pressure on exporters.
Exports drop across the board
According to StatsCan, total exports dropped 3% in August, while imports did rise slightly by 0.9%.
The drop in exports was driven by both lower prices and volumes, an indication that longstanding challenges in Canada’s international trade performance persist.
Notably, outward shipments to the US, Canada’s largest trading partner, slipped 3.4% to C$44.18 billion, mainly as a result of lower unwrought gold sales.
Weaker exports of lumber, machinery and equipment also impacted broad-based sector weakness.
Overseas sales slipped 2%, the third-straight monthly drop. The drop was mainly the result of lower crude oil and nuclear fuel exports, StatsCan said.
Tariffs and trade shifts add pressure
Canada has faced trade troubles entering this year when US President Donald Trump placed tariffs on key Canadian exports by sector.
While companies have had to move supply chains out of the country in response to the measures, that shift has not been smooth.
Canada’s portion of exports to the US had dipped below 70 per cent earlier this year, but edged back to 73 per cent in August, from 75 per cent a year earlier.
Notwithstanding that bounce, the multiyear trend is of a slow but steady decline in Canada’s reliance on its southern neighbour.
Reuters had projected a C$5.55 billion shortfall in August, compared to a revised C$3.82 billion deficit in July, but the result came in much worse than expected.
Imports edge higher despite US decline
Also, Canadian imports from the United States declined 1.4% in August, leaving Canada with a trade surplus with its neighbour of C$6.43 billion compared with C$7.42 billion in July.
On the other hand, imports from foreign countries increased significantly by 4.2% and reached an all-time high.
This surge in non-US imports pushed Canada’s trade gap versus the world to a record, as the deficit with the rest of the world rose to $12.8 billion from $11.2 billion the previous month.
The widening disparity highlights how changes in the global supply chain and increasing appetite for foreign products at home are altering Canada’s trade position.
Political and economic implications
Prime Minister Mark Carney is scheduled to meet with President Donald Trump on Tuesday, as pressure mounts on Ottawa to address the fallout from US tariffs on critical industries such as steel, cars, and lumber.
However, analysts have cautioned that the chances of a breakthrough deal are small.
The increasing deficit and export weakness provide new challenges for policymakers attempting to maintain economic momentum in the face of uncertain global demand and altered trade connections.
For Canadian exporters, particularly those relying on US markets, trade flow volatility highlights the fragile recovery from previous interruptions.
What’s ahead for Canadian trade?
With both foreign demand and commodity prices under pressure, Canada’s trade outlook remains uncertain as the year nears its end.
The record deficit with non-US partners demonstrates how efforts to diversify export markets have not yielded consistent benefits.
As Canada balances local economic concerns with the complexities of international trade negotiations, August’s numbers serve as a sharp reminder of the challenges facing one of the world’s most trade-dependent countries.
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