- Canada’s goods exports rebounded 6.4% in February (m/m), but imports rose an even greater 8.4% (chart 1). Motor vehicles and parts was the largest contributor on the export side, rebounding 24.2% in February after falling 21% in January (due to a longer-than-usual production shutdown over the holiday season). Metals were a close second, with gold shipments increasing 11% after dropping in January and aluminum exports increasing a solid 19.6%. On the import side, the gold, silver, and platinum category more than doubled over the previous month and was the main driver of the February increase. After adjusting for prices, export volumes were up 4.9% and imports were 7.1% higher on the month. The February data confirms that net trade will drag on Q1 growth—and likely more than we expected in our latest outlook. However, we expect a rebound in Q2, in part due to the increase in oil prices.
- Looking past the monthly volatility, exports are broadly in line with 2024 levels, though gold has masked some declines. Excluding gold, Canadian exports have averaged about 12% lower over the past three months compared to the same period a year ago (chart 2), led by the categories targeted by the U.S. sectoral tariffs (chart 3): steel (-55%), aluminum (-12%), forestry (-23%), and motor vehicles and parts (-24%).
- The share of Canadian exports bound for the U.S. is gradually trending lower, averaging 76% in 2024 and 72% in 2025, and coming in at 66% in February 2026. This has been driven by a decline in exports to the U.S. and increasing exports to other regions—mainly Europe (chart 4). In February, exports to the U.S. rose 4.4% m/m but were down 10.4% compared to 2024. Exports to other countries rose 10.5% after a weak January and were up 42.4% from 2024—though much of this has been driven by elevated overseas exports of gold. On the import side (chart 5), the share of Canadian imports from the U.S. was down slightly in February to 59% from 62% in 2024.
- Canada continues to benefit from a (relatively) low effective tariff rate on total exports. 3.1% is our latest estimate (based on pre-tariff trade flows) of the increase in tariffs since end-2024, thanks to most of our trade with the U.S. continuing on a tariff-free basis under CUSMA. This is down from 4.5% in February due to the country-specific U.S. IEEPA tariffs being replaced by a 10% global tariff. The reported average actual duties paid on U.S. goods imports from Canada was slightly above 3% for the third month in a row, down from close to 4% six months ago (chart 6). This could tick lower in March, given the tariff changes in late February. The proportion of Canadian goods imported into the U.S. facing tariffs has settled around 10% (chart 7).
- The U.S. trade deficit is back close to its pre-tariff level (chart 8). U.S. trade saw significant volatility early in 2025 in response to the tariffs, before stabilizing later in the year. In February, U.S. exports rose 4.2% and imports increased 4.3%, resulting in an increase to the trade deficit to US$57 bn, down from around US$70bn in 2024.
- The U.S. import tariffs continue to create inflationary pressures in that country, with the latest estimate of the cumulative impact of the tariffs on U.S. CPI reaching nearly a full percentage point (chart 9)—clouding the outlook for U.S. interest rate cuts, especially given recent increases in oil prices.
- Tariffs and uncertainty (chart 10) continue to be elevated and dynamic. Although the replacement of the U.S. IEEPA tariffs with the temporary global tariff of 10% was positive for Canada (and many other U.S. trade partners), the vast majority of our trade has been compliant and thus exempt from those tariffs. The sectoral tariffs are by far the most impactful for Canada, and have not been affected by the recent changes. However, there are reports today of potential changes to the steel and aluminum tariffs, which could see a lower tariff rate for some items, but against a broader base for all items—with the net effect possibly increasing the tariffs paid.
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