If you judged Canada’s trade relationship with the United States in June by headlines alone, you might think things were looking up. Exports to our southern neighbor rose 3.1% from May a welcome bump. But scratch beneath the surface, and the picture is less rosy: year-over-year, those exports were still down 12.5%.
In fact, our overall merchandise trade deficit with the world widened to $5.9 billion in June, up from $5.5 billion the month before. The only reason our surplus with the U.S. grew $3.9 billion from $3.6 billion was because our imports from them rose more slowly than our exports. In other words, it’s not exactly a victory lap.
What’s driving these swings? Tariffs, uncertainty, and a lot of economic whiplash. The first half of the year was a rollercoaster for Canadian exporters, with U.S. tariff threats constantly in play. We saw record-high exports in Q1 as businesses scrambled to ship goods before tariffs kicked in, only to watch volumes tumble 12.8% in Q2. RBC’s Nathan Janzen put it bluntly: a 31.4% annualized plunge in export volumes will almost certainly drag down Canada’s GDP.
Yes, June saw a modest rise in total exports, thanks largely to higher energy prices. But by volume, exports actually fell. And when it comes to metals and minerals, the news was downright grim shipments of unwrought gold to the UK slumped, and U.S. steel and aluminum tariffs doubled to 50%, cutting our exports of aluminum and steel products by over 11%. Motor vehicle parts dropped 4.2% as well.
Some quirks in the numbers also make June’s bump less impressive. A big-ticket import a one-off offshore oil project module from the U.S. to Newfoundland skewed the data, while Canadian exporters got a temporary lift from higher prices rather than higher demand.
The kicker? June’s trade report doesn’t even include the latest hit: President Trump’s 35% tariffs on Canadian imports and 50% tariffs on semi-finished copper that began August 1. While RBC expects the real impact to be muted thanks to exemptions under the Canada-U.S.-Mexico Agreement Canadian exporters are still playing defense in an unpredictable game.
The one small silver lining? Canada, under current rules, enjoys the lowest tariff rate of any major U.S. trade partner. That gives our exporters a fighting chance to grab U.S. market share from competitors. But “lowest” doesn’t mean “low,” and with global trade tensions simmering, there’s little room for complacency.
Canada’s trade story right now is like a dance with an unpredictable partner: one step forward, two steps back. The challenge ahead will be finding our rhythm before the music changes again.
