Exports See Largest Decline since April 2025

Canada’s merchandise exports declined 4.7 per cent (month-over-month) in January. Meanwhile, imports were down 1.1 per cent. As a result, Canada’s merchandise trade deficit widened from $1.3 billion in December to $3.6 billion in January.

Key insights

Exports recorded their largest percentage decline since the United States imposed tariffs on Canadian goods. Exports of motor vehicles and parts fell to $5.4 billion, their lowest level since September 2021. The decline was driven primarily by a sharp 32.5 per cent drop in passenger car and light truck exports in January. This decrease coincided with reduced motor vehicle production in Canada, largely reflecting extended seasonal production shutdowns. At the same time, exports of metal and non-metallic mineral products continued to significantly influence monthly trade fluctuations. A decline in exports of unwrought gold to the United Kingdom was the main factor behind the 6.5 per cent decrease in exports to countries other than the United States.

Canada’s short-term trade outlook remains clouded by uncertainty. Following a sharp decline in the second quarter of 2025, nominal exports rebounded in the third and fourth quarters. While these gains suggest some resilience in the face of U.S. tariff pressures, total exports for the year still declined by 0.2 per cent. Much of the recent strength has been driven by shipments of unwrought gold, masking underlying weakness in core trade flows. Excluding gold and price effects, the trade outlook appears more subdued. Downside risks remain elevated amid ongoing uncertainty surrounding U.S. trade policy and signs of softening in the U.S. economic environment.

The federal government plans to reduce reliance on U.S. market. Prime Minister Mark Carney has set an ambitious target to double Canada’s exports to non-U.S. markets by 2035. Early signs of progress emerged in 2025, with Canadian exports to countries other than the United States increasing by 17.4 per cent over the year. Momentum toward this objective has been supported by recent policy developments, including a new trade agreement with China that rolled back tariffs between the two countries. The agreement marks a notable shift after several years of escalating trade tensions. Rather than relying on the prospect of a breakthrough agreement with the United States, Canada is increasingly focused on diversifying its trade relationships. Strengthening trade ties with a wider set of partners will be critical to improving the resilience of Canadian trade in the years ahead.

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