- Canada’s goods exports rose 2.6% in December and imports increased 0.6% (chart 1)—resulting in a deficit of $1.3 bn for the month. As has been the case for several months, unwrought gold was the main driver in changes on the export side—though higher exports of aircraft and other transportation equipment also contributed to the monthly rise. Gold imports also drove much of the rise in imports in the month, along with increased imports of motor vehicles and parts.
- Looking at 2025 as a whole, nominal Canadian goods exports were down 0.2%, as significant increases in gold exports were not enough to offset declines in most other product categories (chart 2), notably steel (-31%), aluminum (-7%), forestry (-10%), and motor vehicles and parts (-3%). This was weaker than many other countries (chart 3).
- Trade volumes tell a more negative story. After adjusting for prices, goods exports were down 2% on the year and imports were roughly flat (chart 4). As a result, trade is expected to have dragged on overall GDP growth for 2025. However, Q4 export volumes were 2.1% stronger than Q3, with imports up only 0.3%. This is a stronger contribution to growth than we assumed in our January economic outlook. We expect the drag from trade to continue to gradually decline though 2027.
- The share of Canadian exports bound for the U.S. declined from 76% in 2024 to 72% in 2025 and is trending lower. This has been driven by a decline in exports to the U.S. and increasing exports to other regions—mainly Europe (chart 5). In December, exports to the U.S. rose 1.1% m/m but were down 16.7% y/y. Exports to other countries rose 5.8% m/m and were 30% higher y/y—though much of this has been driven by elevated overseas exports of gold. A similar dynamic is playing out on the import side (chart 6), as the share of Canadian imports from the U.S. fell from 62% in 2024 to 59% in 2025.
- Canada continues to benefit from a (relatively) low effective tariff rate on exports to the U.S. 6.3% is our current estimate (based on pre-tariff trade flows), thanks to most of our trade continuing on a tariff-free basis under CUSMA. The best estimate of the average actual duties paid on U.S. imports from Canada has fallen in recent months, dropping from 3.9% in September to 3.1% in December (chart 7). The proportion of Canadian goods imported into the U.S. facing tariffs has settled around 10% (chart 8).
- The U.S. trade deficit returned to its pre-tariff level in December (chart 9). U.S. trade saw significant volatility in 2025, with its trade deficit spiking early in the year due to high imports driven by tariff-front-running, then reaching its smallest level since 2009 in October, before normalizing at the end of the year.
- U.S. trade flows have seen compositional changes. Comparing 2025 to 2024, U.S. imports were significantly lower from China (-29%) and Canada (-7%), but higher from the EU (+5%), Mexico (+6%), and the rest of the world (+19%).
- 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 a full percentage point (chart 10)—clouding the outlook for U.S. interest rate cuts.
- With the U.S. Supreme Court expected to rule on the legality of the IEEPA tariffs soon, there could be renewed turbulence in the ongoing U.S. global trade war. 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 will continue to weigh on the Canadian economy as long as they remain in place.
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