Commodity Strength Offsets Broader Export Weakness

Canada’s merchandise exports rose 0.2 per cent in September. Meanwhile, imports were down 0.3 per cent. As a result, Canada’s merchandise trade surplus widened from $5.0 billion in August to $5.4 billion in September.

Key Insights

Canada’s export performance remained uneven in September, with modest headline growth masking weakness across most product categories. Higher crude oil prices and increased natural gas shipments lifted energy exports, while stronger U.S. demand for Canadian-held gold drove gains in metal and non-metallic mineral products. These increases, however, were offset by notable declines in consumer goods, machinery, motor vehicles and forestry products. Some of the weakness may reflect a reversal of August’s tariff-related front-loading, when exporters accelerated shipments ahead of U.S. trade restrictions. Moreover, real merchandise exports fell approximately 0.5 per cent in 2026Q3, pointing to a loss of momentum in export activity following stronger performance earlier in the year. The September increase in nominal exports therefore offers a somewhat misleading picture of underlying trade conditions, as higher commodity prices rather than stronger export volumes provided the lift.

Import declines were largely concentrated in the automotive sector. Imports of motor vehicles and parts dropped for a second straight month. The pullback reflects supply disruptions and unplanned production stoppages at U.S. auto plants, alongside softer Canadian vehicle production. Excluding motor vehicles and parts, imports increased 1.5 per cent, pointing to firmer activity across the remainder of the import base in September. In particular, imports of electronic and electrical equipment reached a record high, supported by strong demand for computers and processing units used in data centres. This reflects continued investment in digital infrastructure and computing capacity.

Looking ahead, Canada’s trade outlook is likely to remain subdued in the near term. Recent declines in real export and import volumes point to softer underlying trade activity, while persistent Canada–U.S. trade uncertainty is likely to weigh on cross-border shipments and keep businesses cautious. Although some of September’s export weakness may reflect the unwinding of earlier tariff-related front-loading, the broader outlook remains highly dependent on the direction of trade negotiations and the extent to which U.S. tariffs disrupt key supply chains, particularly in the manufacturing sector. However, efforts to diversify Canada’s trading relationships could provide some relief. Merchandise trade with countries outside the U.S. is up approximately 27.8 per cent year-to-date compared with the 2025 average, suggesting that non-U.S. markets are becoming an increasingly important outlet for Canadian exporters. While this momentum offers a potential offset, it is unlikely to fully insulate Canada from ongoing trade disputes.

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