A Strong Trade Month, but Clouds are Gathering

Canada’s merchandise exports rose 2.5 per cent in August. Meanwhile, imports were down 2.0 per cent. As a result, Canada’s merchandise trade surplus widened from $787 million in July to $4.2 billion in August.

Key Insights

Exports rebound strongly, after falling 2.6 per cent in July, despite an appreciation of the Canadian dollar. The increase was therefore driven by stronger underlying shipments, with real export volumes also rising. Energy exports led the recovery, as refined petroleum shipments jumped 17.4 per cent and crude oil exports rose 2.1 per cent, although higher prices were an important factor. Beyond energy, consumer goods posted particularly strong growth, driven partly by miscellaneous goods and supplies, while industrial machinery and equipment exports surged 10.1 per cent, reaching their highest level since January 2025, largely on stronger shipments to the United States. Overall, the August increase was broad-based, but the strength in machinery and other goods shipped to the U.S. also points to some potential front-loading ahead of new U.S. tariffs.

Imports fell for the first time in seven months. However, the weakness was concentrated in a few areas, with imports still rising in 6 of 11 product sections. The biggest drag was motor vehicles and parts, down 8.8 per cent following an 8.3 per cent surge in July. Passenger cars and light trucks fell 15.4 per cent after July’s record-high imports were boosted by shorter-than-usual U.S. summer production shutdowns. Even excluding autos, imports were still down 0.5 per cent, while real import volumes fell 1.1 per cent, pointing to a genuine pullback in import demand. Metal and non-metallic mineral products also declined 7.0 per cent, led by a sharp 40 per cent drop in unwrought gold, silver and platinum-group metals, while imports of metal ores and non-metallic minerals fell 15.5 per cent to their lowest level since November 2025, reflecting reduced shipments of ores from countries including Australia, Peru, Brazil, and Mauritania.

Canada’s near-term outlook remains uncertain as the trade relationship with the United States enters a more difficult phase. Trade negotiations were suspended in August after the two sides failed to reach agreement, and the U.S. subsequently imposed 50 per cent tariffs on C$27.6 billion of Canadian goods, prompting Canada to introduce matching counter-tariffs. Overall, meaningful progress toward a trade deal has yet to be made. The key near-term risk is January 1, 2027, which is when the U.S. has threatened to raise tariffs on Canadian vehicles, trucks and auto parts to 50 per cent if no agreement is reached. Given the highly integrated North American auto supply chain, such an increase would represent a significant additional headwind for Canadian exports, manufacturing activity, and business investment heading into 2027.

For more details about the impact of U.S. tariffs and our research on Canada’s place in a changing world, please read more.