This monthly report will detail trade shifts in North America, highlight what we’re seeing in today’s dynamic trade environment, and identify what it might mean for growth going forward.
- Canada’s goods exports increased 6.3% in September, continuing their recovery since the spring. Imports accelerated their decline by dropping 4.1%, leading to a small overall goods trade surplus for the month. Unwrought gold, aluminum, and energy products saw the largest increases on the export side, with unwrought gold also driving a large share of the decline in imports.
- On a year-over-year basis, Canadian goods exports were roughly flat in September, though were down by 3.2% for Q3 as a whole. Significant increases in the value of gold exports (aided by sharply higher gold prices) have helped to partially offset lower exports in most other product categories, including steel and aluminum, forestry, motor vehicles and parts, farm and fishing products, and industrial materials.
- With all the trade data now available for Q3, it appears that net exports were somewhat stronger than what StatCan had assumed in its Q3 national accounts release late last month, providing some upside risk for that estimate.
- The share of Canadian exports bound for US declined from 76% in 2024 to 71% in September, driven by a decline in exports to the US and gradually increasing exports to other countries. Exports to the US were up 4.6% m/m but down 5/6% y/y. Exports to other countries jumped up by 11% m/m and are now 18.6% higher y/y.
- After widening drastically early in the year on tariff-front-running imports, the overall US trade deficit has since been narrowing. Imports are back to roughly their 2024 level (after spiking early in 2025), and exports have continued to steadily increase. However, there have been compositional changes to US trade flows. In Q3 as a whole, US imports were significantly lower y/y from China (-40%), Canada (-10%), the EU (-8%) and higher from Mexico (+4%).
- US customs data show that the proportion of Canadian goods imported into the US facing tariffs remains in the 10–15% range, down from 20–25% in 2024 (due to the increased incentive for firms to submit CUSMA compliance paperwork).
- Canada continues to benefit from a (relatively) low effective tariff rate on exports to the US (6.3% is our current estimate) thanks to most of our trade continuing on a free-trade basis under CUSMA. The average actual duty paid on US imports from Canada was 3.9% in September and is rising toward our estimated effective tariff rate, as pre-tariff inventories run down and get replaced with new purchases.
- With the US Supreme Court expected to rule on the legality of the IEEPA tariffs soon, there could be renewed turbulence in the ongoing US global trade war in the coming weeks. If these tariffs are struck down, these could be replaced under a new mechanism—which would likely again be challenged, leading to renewed uncertainty. For Canada, the sectoral tariffs are by far the most impactful, and they will continue to weigh on the Canadian economy as long as they remain in place.
- The US import tariffs continue to create inflationary pressures in that country, slowing the pace of the Federal Reserve’s cutting cycle. The recent rollbacks of some tariffs on food may help to slow food price inflation somewhat, but the overall tariff rates remain elevated and the new announcements and threats demonstrate the continued fluidity of the global trade landscape.
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