Merchandise Trade March 2025: Running low on gas.

“Exports to our biggest customer are running low on gas. The U.S. tariffs on its top trading partners—including Canada—put real pressure on Canadian exports. Automakers clearly rushed to ship as many vehicles as they can into the U.S. before the new levies kicked in.

But there’s a silver lining, exports to other markets jumped, especially oil shipments heading overseas. That diversification bump is a tiny spark of optimism. If CUSMA compliance is taken seriously by Canadian companies, it could provide some insulation, but there is no doubt the trade numbers will look chaotic over the next few months.”

Headline

Canadian nominal merchandise exports declined 0.2% in March, and imports were down further 1.5%. U.S. tariffs on major trading partners, including Canada were imposed in March, leading to another month of distorted trade flows. Most sectors took a hit to their export values, but trade volumes were up nearly 1% on the month (+4% compared to a year ago). The trade surplus with the U.S. narrowed, bringing the overall trade balance into a $506 million deficit.

Key Takeaways

• 6 of 11 categories contributed to the decline in March exports. Aircraft, consumer goods, and metal and non-metallic products were sectors with the largest declines. Some sectors benefited from higher exports, including motor vehicles and parts, metal ores and minerals, and forestry products. Iron and steel products were down 9%, likely due to U.S. tariffs. Other covered products, including aluminum was up on the month as U.S. buyers stockpile goods (Canada supplies 53% of U.S. aluminum imports).
• Merchandise imports were down 1.5% in March due to lower imports of meta and non-metallic minerals, and energy products. Services exports and imports were up 0.3% and down 0.9% respectively in March. Overall, monthly exports of goods and services declined 0.1% and 1.3%, respectively.
• Exports to the United States decreased $ 3.7 billion (-6.6%), with imports down 3%. This narrowed the trade balance with the U.S. to $8.4 billion. The diversification of Canada’s exports will take much longer, but some encouraging signs in March show that some products can help offset some of the hit. Most of the $3.7 billion decline in export value to the U.S. was replaced by exports to other countries. In March, exports to other countries jumped 25%, mostly due to exports of gold and crude oil were supplied to European markets.

Implications

• U.S. tariffs were briefly imposed in early March, with an eventual 30-day delay. Despite the disruption, exporters rushing to move product to the U.S. in advance of tariffs has resulted in exports being 2.5% higher than November 2024.
• The share of Canadian imports entering the U.S. under CUSMA rose from 33% in February to 50% in March, a sign that companies could be getting serious about compliance under the North American trade agreement.
• Canada’s quarterly net trade position is very slim, with very little evidence of a positive contribution to Q1 GDP growth. First-quarter GDP estimates are trending lower, and the Bank of Canada will need to weigh deteriorating economic data more than inflationary concerns. This will be a challenge as we monitor the effects of the trade war.

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