Ottawa | Reuters—Canada’s trade deficit in May narrowed after a record-breaking deficit in April as total exports rose and imports fell even as the impact of U.S. tariffs dented shipments south of the border, data showed on Thursday.
The trade deficit in May met expectations at C$5.9 billion, down from a downwardly revised C$7.6 billion in the prior month, Statistics Canada said. Exports increased by 1.1 per cent on a monthly basis after an 11 per cent slump in April.
This was the first increase in exports in four months, StatCan said, and was driven by record exports to the rest of the world, excluding the U.S.
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“The biggest takeaway I see from the data is just diversification,” said Prince Owusu, senior economist with Export Development Canada.
“While we continue to bleed in the U.S., we are basically diverting trade to other markets,” he said.
Trade with U.S. at lowest levels since 2020
The share of the exports and imports with the U.S. dropped to their lowest levels in May, barring the pandemic year of 2020.
Exports to the U.S., Canada’s biggest trading partner, fell for the fourth month in a row with May registering a drop of 0.9 per cent.
In volume terms total exports were up 0.7 per cent in May.
President Donald Trump has imposed 25 per cent tariffs on imports of Canada-made automobiles and 50 per cent tariffs on imports of steel and aluminum. Canada has also imposed retaliatory tariffs.
This trade skirmish between the two countries whose bilateral trade surpassed a trillion Canadian dollars last year has depleted Canada’s exports and has hit the job market.
Canada’s Prime Minister Mark Carney and Trump are aiming to reach some form of a trade deal by July 21.
Canada’s total exports for May were C$60.81 billion, up from C$60.12 billion in April, StatCan said.
This category increased by 15.1 per cent, driven mainly by exports of unwrought gold that were up 30.1 per cent to reach a record $5.9 billion.
“Most of the rise was attributable to higher physical shipments of gold to the United Kingdom,” the statistics agency said. Excluding metal and non-metallic mineral products, total exports were down 1.2 per cent, it added.
Canada looking for trade diversification
As trade with the U.S. has dropped, Canadian companies have been scouting for opportunities to increase trade with rest of the world.
Exports to countries other than the United States rose 5.7 per cent in May to reach a record high, StatCan said, but it was not enough to fully mitigate the impact of lost exports to the U.S., as well as China due to a drop in canola and crude oil shipments.
Total imports dropped by 1.6 per cent to C$66.66 billion, with imports from the U.S. falling by 1.2 per cent in May.
The Canadian dollar slightly weakened after the trade data and was trading down 0.23 per cent to 1.3615 to the U.S. dollar. Yields on the two-year government bonds were up 3.7 basis points to 2.706 per cent.
The deficit in May, albeit narrower than the prior month, is still among the highest seen historically and economists said that two months of decline will pull down the second quarter GDP.
