Merchandise Trade July 2025: Canada’s Trade Deficit Narrows in July

Canada’s trade position steadied in July as a rebound in energy and autos lifted exports while imports slipped back from a large one-time increase in June. The narrowing of the trade deficit reflects a stronger surplus with the U.S., though this was tempered by a widening shortfall with other markets. The picture underscores a fragile balance: commodity and vehicle rebounds offered relief, but persistent weakness in metals and lingering tariff headwinds highlight ongoing vulnerabilities.

Headline

In July, merchandise exports rose 0.9% to $61.9 billion, while imports dipped 0.7% to $66.8 billion. The goods trade deficit narrowed from $6.0 billion in June to $4.9 billion. Exports to the U.S. climbed 5.0% to $45.1 billion (–10.3% y/y), while non-U.S. exports fell 8.6% to $16.7 billion. With services exports up and services imports down, the combined goods-and-services deficit narrowed to $4.4 billion.

Key Takeaways

• Exports were up 0.9% (to $61.9B) with monthly gains concentrated in energy products (+4.2% to $12.8B) and motor vehicles (+6.6% to $7.6B), reflecting higher crude oil prices and volumes and a seasonal lift in autos as summer shutdowns were less than usual.
• 7 of 11 sectors grew. July’s top contributors were energy (+4.2% to $12.8 billion), motor vehicles & parts (+6.6% to $7.6 billion), and electronic equipment (+9.6% to $3.1 billion). In contrast, metal products fell 8.0% to $8.7 billion, led by unwrought gold (–12.2%) and aluminum (–31.0%), agri-food slipped 4.9% to $4.8 billion, and aircraft & aerospace declined 11.5% to $2.5 billion.
• Imports were down 0.7% led by a decline in industrial machinery (–18.8%), which reversed June’s $2B offshore oil module delivery. Excluding this, total imports were up 2.2%, with gains in farm products (+7.8%), aerospace (+11.0%), motor vehicles (+2.2%), and consumer goods (+1.6%).
• U.S. trade balance is strengthened, exports to the U.S. rose 5% (oil and autos), while U.S. imports fell 2.2%. Canada’s merchandise surplus with the U.S. widened to $6.7B.
• Persistent declines in metals, particularly aluminum now at its lowest since 2019 after U.S. tariffs doubled to 50%, point to structural headwinds that may persist into the fall.
• The non-U.S. trade gap widened, as exports to non-U.S. markets fell 8.6% for a second consecutive month while imports rose 1.3%, pushing the deficit with non-U.S. partners to $11.7B.
• Services trade helped lift the overall balance with service exports up 2.6% to $18.7B, while service imports fell 1.3% to $18.2B, cushioning the goods shortfall. The combined deficit narrowed to $4.4B.

Implications

• The narrowing of July’s trade deficit was due to the reversal of June’s one-time machinery import and temporary rebounds in oil and autos, amplified by seasonal quirks in auto production. Excluding these factors, underlying trade momentum remains fragile.
• The widening non-U.S. deficit, despite still-robust y/y export growth (+14.0%), underscores the difficulty of diversifying away from the U.S. market.
• While services provided welcome support, part of the improvement reflects lower Canadian travel imports to the U.S., rather than structural gains.

Sources: Statistics Canada; Canadian Chamber of Commerce Business Data Lab