Canadian Merchandise Trade (April 2025)

Export Slowdown Widens Canadian Trade Deficit in April

• Canada's trade deficit widened from a revised $2.3 billion in March to $7.1 billion in April. This is the widest monthly trade deficit on record.
• Merchandise exports cratered (-10.8% m/m) continuing their slide from February and March's much smaller declines. The drop in exports was broad-based, falling in 10 of 11 industries. Exports of passenger cars and light trucks (-22.9% m/m) heavily weighed on headline readings as buyers stockpiled in the months preceding auto tariffs. Sizeable decreases were also seen in exports of consumer goods (-15.4% m/m), energy products (-7.9% m/m), and industrial machinery and equipment (-22.5% m/m).
• Merchandise imports were down by a more moderate 3.5% m/m in April. Once again, imports of motor vehicles and parts (-17.7% m/m) contributed most to the decline amid the implementation of tariffs. Industrial machinery, equipment, and parts (-9.5% m/m), consumer goods (-4.2% m/m) and electronics (-5.5% m/m) weighed on the total import reading.
• In volume terms, merchandise exports were down by a hefty 9.1% m/m while imports moved lower by 2.9% m/m.
• Canada's merchandise trade surplus with the United States shrunk to its smallest point since end-2020, currently at $3.6 billion as of April.

Key Implications

• It was an abysmal month for Canadian trade but one that comes as no surprise. April marked the first month that Canada faced the full suite of American tariffs, most notably auto tariffs, which are imposing a massive headwind on auto trade. It is encouraging to see exports to non-U.S. markets ramp up over the past two months, but it hasn't been enough to offset the sizeable retraction in shipments south of the border.
• A pull-forward in trade helped fuel healthy export gains in the first quarter, making a notable contribution to total Canadian GDP growth. While we only have one trade data point on the quarter, this story is due for a significant course-correction, with net trade pointing to a significant drag on second quarter growth. Risks to the near-term trade picture are also tilted to the downside. Canada recently paused many U.S. counter tariffs, which may buffer the impact on near-term imports, while exports are expected to dampen amid ongoing trade tensions.          

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