Exports Fall for the First Time in Six Months

Canada’s merchandise exports fell 2.3 per cent in July. Meanwhile, imports were up 2.2 per cent. As a result, Canada’s merchandise trade surplus narrowed from $4.2 billion in June to $769 million in July.

Key Insights

Exports pulled back in July but remain elevated relative to 2025 levels. The decline in exports this month was concentrated in energy and metal and non-metallic mineral products, reflecting lower crude oil prices and volumes and weaker precious metal shipments. Given recent volatility in gold and other precious metals, July’s decline partly reflects a reversal of strong trade flows in this product category rather than broad-based weakness. In fact, exports excluding energy and metal and non-metallic mineral products rose 0.6 per cent in July. Export levels also remain elevated, with the year-to-date average sitting 13.3 per cent above the 2025 average. Meanwhile, continued growth in shipments to non-U.S. markets (up 7.4 per cent in July) points to further diversification of Canada’s export base.

Record-high motor vehicle and parts imports drove July’s increase, while weakness across several other categories limited broader gains. Imports of motor vehicles and parts were supported by less pronounced seasonal shutdowns at North American assembly plants, particularly in the United States. Metal and non-metallic mineral products also contributed to growth, reflecting stronger shipments of copper and precious metals. These gains were partially offset by declines in energy products, electronics, and aircraft and other transportation equipment. Overall, July’s strength was concentrated in autos and metals rather than signaling a broad-based increase in import demand.

Canada’s near term trade outlook remains clouded by significant downside risks. Trade tensions with the United States have intensified following the breakdown of negotiations and the U.S.’s imposition of 50 per cent tariffs on $27.6 billion of Canadian goods in August. Canadian exporters also continue to face sector-specific tariffs on steel, aluminum, copper and motor vehicles, andthe U.S. has threatened to raise tariffs on Canadian autos, auto parts and steel to 50 per cent beginning in January 2027. Meanwhile, the ongoing U.S.–Iran conflict adds another layer of uncertainty. Higher oil prices could support the value of Canadian energy exports, but prolonged disruptions and tighter global energy supplies could weigh on global growth. Overall, escalating protectionism and geopolitical uncertainty remain key downside risks to Canada’s trade outlook.

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