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Gold Slump Behind Latest Trade Balance Decline

Canadian Economics

By: David Ristovski

    

Canada’s merchandise exports fell 3.0 per cent (month-over-month) in August. Meanwhile, imports were up by 0.9 per cent. As a result, Canada’s merchandise trade deficit widened from $3.8 billion in July to $6.3 billion in August.

  • Exports fell to $60.6 billion in August and were down in 8 of 11 product categories. Exports of metal and non-metallic mineral products (-7.6 per cent) posted the largest decline, followed by exports of industrial machinery, equipment and parts (-9.5 per cent), as well as exports of forestry products and building and packaging materials (-10.1 per cent). Excluding the metal and non-metallic mineral products group, exports were down 1.9 per cent. In volume terms, total exports were down 2.8 per cent in August.
  • Imports rose to $66.9 billion in August. Overall, increases were recorded in 6 of 11 product categories. The main contributor to the monthly increase was imports of metal and non-metallic mineral products (+24.2 per cent), for which large imports of unwrought gold were reported. Excluding this product section, total imports were down 1.0 per cent. Several product sections recorded losses in August, which partially offset the overall increase in imports. For instance, imports of energy products fell 12.8 per cent due to lower imports of crude oil from the United States. Higher prices also contributed to the monthly gain—in volume terms, total imports declined 0.3 per cent.
  • Canadian exports to the U.S. fell 3.4 per cent in August. Meanwhile, imports from the United States fell by 1.4 per cent. As a result, the merchandise trade surplus with the United States narrowed from $7.4 billion in July to $6.4 billion in August.

Insights

Aluminum exports face significant headwinds due to tariffs. Aluminum exports face significant headwinds due to tariffs. The U.S. government initially imposed a 25.0 per cent tariff on Canadian aluminum in March, later raising it to 50.0 per cent in June, with no exemptions granted under CUSMA. Between April and August, Canadian aluminum exports averaged $848 million per month—24.0 per cent below the 2024 monthly average. However, given Canada’s status as a net exporter of aluminum, the impact of Canadian retaliatory tariffs on U.S. aluminum exports has been minimal thus far.

Overall, exports have seen a slight recovery since April. Following a record-low national trade balance in April—coinciding with the introduction of U.S. tariffs on Canadian imports—exports have demonstrated a gradual rebound in May, June, and July. The decline in August was largely driven by lower shipments of unwrought gold to the United States, which may be obscuring broader underlying momentum. Moreover, despite ongoing tariff-related pressures, total exports over the first eight months of the year were 0.3 per cent higher than during the same period in 2024.

Trade outlook clouded by U.S. policy uncertainty. Canada’s near-term trade prospects remain highly uncertain amid shifting U.S. trade policy and a slowing American economy. Most recently, President Trump signaled plans to intensify trade tensions by introducing a 25.0 per cent tariff on all medium- and heavy-duty trucks imported into the United States, effective November 1. Given the deep integration between Canada’s and the U.S. auto manufacturing sectors, such measures would further constrain Canadian competitiveness in its largest export market. In the absence of a renewed trade agreement with the United States, near-term economic performance is likely to remain under pressure.

For a more detailed breakdown, check out our analysis on The True Cost of the Trump Tariffs.

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