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Trade Balance Narrows to $506 Million in March

Canadian Economics

By: David Ristovski

    

  • Canada’s merchandise exports fell by 0.2 per cent (month-over-month) in March. At the same time, imports were down 1.5 per cent. As a result, Canada’s merchandise trade deficit narrowed from $1.4 billion in February to $506 million in March.
  • Exports fell to $69.9 billion in March. Exports were down in 6 of 11 product categories. Exports of Consumer goods (-4.2 per cent) and energy products (-2.2 per cent) contributed most to the monthly decline, along with lower prices. Meanwhile, higher exports of motor vehicles and parts (+7.7 per cent) partially offset the overall drop this month. In volume terms, total exports were up 1.8 per cent in March.
  • Imports fell to $70.4 billion in March, the first decline in five months. The largest contributors to the monthly decrease were imports of metal and non-metallic mineral products (-15.8 per cent) and energy products (-18.8 per cent). In volume terms, total imports fell 0.1 per cent.
  • Canadian exports to the U.S. were down 6.6 per cent in March. Meanwhile, imports from the United States declined by 2.9 per cent. As a result, the merchandise trade surplus with the United States went from a record high of $10.8 billion in February to $8.4 billion in March.

Insights

Tariff threats have caused recent volatility in trade. Between September 2024 and January 2025, total exports increased by 15.7%. Recent tariff threats from the United States government prompted American importers to accelerate shipments to mitigate potential additional costs. However, trade tensions between the United States and Canada have since intensified, leading to a 6.6% decline in exports to the U.S. this month.

Recent trade tensions with the United States have highlighted the need for Canada to diversify its export markets. In 2024, an average of 75.9 per cent of Canada’s total exports were destined for the U.S. However, with trade tensions causing uncertainty, specifically within the automotive-manufacturing market, Canadian businesses may have to look to other markets. In March, some initial stirrings of this shift became evident as exports to countries other than the U.S. surged 24.8 per cent. Exports of various products to Germany, unwrought gold to the United Kingdom, and crude oil to the Netherlands and Hong Kong contributed most to this monthly result. At the same time, imports from countries other than the U.S. rose by 1.0%, indicating a broader diversification in trade relationships.

The near-term outlook for the Canadian economy is uncertain. Donald Trump’s broad auto tariffs are in effect (which currently exclude tariffs on Canadian auto parts compliant with CUSMA). The Canadian auto manufacturing sector is heavily integrated with the U.S. industry, with 93.4% of passenger car and light truck exports destined for the United States in 2024. As a result, tariffs of this scale could severely impact Canada’s manufacturing sector and trigger negative ripple effects throughout the broader economy. Furthermore, these tariffs will have repercussions for the global economy and international trade. In the short term, Canadian trade is expected to experience a decline in both exports and imports, along with shifts in consumer behaviour. The longer these tariffs remain in place, the more detrimental the overall outlook will be.

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

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