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 fell back again in August, after having improved slightly in the previous three months following the large drop in April. Exports fell by 3.0% and imports increased by 0.9%, increasing the goods trade deficit to $6.3 bn. The export categories with the largest declines in August were metals (led by unwrought gold), industrial machinery and parts, forestry products, and motor vehicles and parts.
- On a year-over-year basis, Canadian goods exports were down 5.5% in August, and down 5.2% on average over the last three months (Jun–Aug)—with the largest percentage declines in industrial chemicals, metals, energy products, and forestry products. Imports were up 1.7% in August, and up 1.5% on average since June.
- The share of Canadian exports bound for US declined from 76% in 2024 to 72% in August, driven by a marked decline in exports to the US in 2025 and only modest growth in exports to other countries. Exports to the US were down 3.4% m/m and 8.0% y/y. Exports to other countries fell 2.0% m/m but were up 1.8% y/y.
- Canada’s trade in services with the US is much smaller than trade in goods, but has been much more stable. It has even improved from a small deficit at the end of 2024 to a surplus of $0.3 bn as of August, thanks to further growth in commercial services exports and a 10% decline in travel imports (i.e., international vacations).
- After widening drastically early in the year on tariff-front-running imports, the US trade deficit has returned to roughly its 2024 level. However, there have been compositional changes to US trade flows. As of July, US imports were running significantly lower y/y from Canada (-10%), the EU (-11%), and China (-35%), and higher from Mexico (+11%) and the rest of the world (+21%).
- US customs data show that the proportion of Canadian goods imported into the US facing tariffs has stabilized at around 10%, down from 20% (due to the increased incentive for firms to submit CUSMA compliance paperwork).
- While uncertainty and effective tariff rates have come down from the peaks of the spring, they remain elevated and continue to weigh on growth around the world. In addition, new US tariff announcements on pharmaceuticals, furniture, and heavy trucks demonstrate the continued fluidity of the global trade landscape.
- Canada continues to benefit from a low effective tariff rate on exports (4.6% is our estimate) thanks to most of our trade continuing on a free-trade basis under CUSMA. However, most of the Canadian industries impacted by the sectoral tariffs have seen clear export declines—especially steel, aluminum, and forestry products.
- Some relief for Canada from some of the sectoral tariffs—as is apparently under discussion—would provide a welcome boost to these industries, but it is difficult to be very confident that the relief would be permanently maintained and/or not offset by new tariffs. As a result, we expect that US tariffs will continue to weigh on growth for the foreseeable future.
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