Exports rise in seventh consecutive monthly trade surplus (chart 1). The value of Canadian exports edged up 0.2% as increases in crude oil and gold more than offset declines in most other categories. Total imports fell 0.3%, led by the second consecutive roughly 9% decrease in motor vehicles and parts (which were impacted by production stoppages in the U.S.). Imports of industrial machinery and equipment (a key indicator for capital investment) fell slightly m/m but remained up 14% y/y. Export volumes (which adjust for prices) fell 3.9% and imports dropped 2.5% (chart 2). Overall, this report helps confirm our expectation that trade will contribute positively to economic growth in Q3.
Volatility in gold and energy exports continues to mask clear declines in some sectors. Exports are lower in most goods categories targeted by the U.S. sectoral tariffs (chart 3) including: steel (-42% vs Dec 2024), forestry (-22%), and autos (-7%)—though aluminum has recovered.
The share of Canadian exports bound for the U.S. is volatile but trending lower, averaging 76% in 2024 and 72% in 2025, and coming in at 70% in September 2026. This has been driven by faster growth in exports to non-U.S. markets (chart 4). In September, exports to the U.S. rose 0.7% m/m and were up 12% since 2024 (aided by the increase in oil prices since last year). Exports to other countries fell 1.1% m/m, but are up 50% from 2024—though much of this increase has been driven by gold. On the import side (chart 5), the share of Canadian imports from the U.S. has gradually fallen to 59% in September from an average of 62% in 2024.
Canada continues to benefit from a relatively low effective tariff rate (ETR) on total exports, though this advantage has narrowed. We estimate Canada’s ETR at 4.5%, up from around 3% before the latest round of new tariffs. The reported average actual duties paid on U.S. goods imports from Canada (which reflects substitution effects) had been trending lower but has risen for the past two months due to the newest U.S. tariffs—reaching 4.2% in September (chart 6). The proportion of Canadian goods imported into the U.S. facing tariffs rose slightly to 26% (chart 7).
The U.S. trade deficit remains high (chart 8). In September, the U.S. trade deficit narrowed slightly as exports rose 1.9% and imports increased 1.2%, but remained elevated at more than US$100 bn—substantially larger than its average 2024 level. Imports reached a record high in the month, driven by rising imports of industrial machinery and equipment (including for data centres) on top of steady imports in most other categories.
Tariffs and uncertainty (chart 9) continue to be elevated and dynamic. Canada continues to benefit from tariff-free access to the U.S. on the vast majority of our trade, but the trade war has heated up following the latest breakdown in negotiations. Our baseline remains that Canada will emerge from the CUSMA negotiations with a competitive ETR and tariff-free access to the U.S. economy for the vast majority of our exports—but also that the path to this outcome will be volatile. There was some tit-for-tat tariff escalation in the late summer and early fall, though this fortunately seems to have settled down. However, additional U.S. tariffs on autos have been threatened for January. That said, given that a deal was so close in August, there remains the potential for a deal in the coming months; indeed, reports indicate that negotiators are back at the table now. It is unclear how the Democratic wins in the mid-term elections will impact the trajectory of Canada-U.S. trade, but there is the possibility of an acceleration of progress during the upcoming ‘lame duck’ session of Congress.
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