A shipping container sits at the Oakland port in California on April 10. In May, Canada’s exports to the U.S. dropped slightly by 0.9 per cent. (Carlos Barria/Reuters)
Canada’s trade deficit took a step back in May, dropping to $5.9 billion after ballooning to a record-breaking $7 billion in April. While still high, this change hints at some relief after months of turbulence, driven largely by ongoing tensions between Canada and the United States.
According to new data from Statistics Canada, Canadian exports rose by 1.1% in May after an 11% plunge in April. This is the first monthly export gain since January, signalling a potential rebound. However, the picture remains complicated, especially when it comes to trade with the U.S., Canada’s closest and most vital trading partner.
Shipments to the U.S. dipped by 0.9% in May. That drop has pushed U.S.-bound exports down to just 68.3% of Canada’s total exports — a striking contrast to the 75.9% monthly average seen throughout 2024. The ongoing trade rift, driven by U.S. President Donald Trump's aggressive tariff policies, has clearly left its mark.
On the import side, Canada saw an overall drop of 1.6%, making it the third consecutive monthly decrease. Imports from the U.S. also slipped by 1.2%. This steady decline highlights the broader cooling of trade between the two neighbours.
April’s deficit surge — from $2.3 billion in March to over $7 billion — had raised alarms across economic circles. Though May’s lower deficit brings some hope, experts say it’s not time to celebrate yet.
Shelly Kaushik, a senior economist at BMO, says while May’s figures are better than April’s, the deficit remains too large to ignore. “We’re still dealing with weak trade performance,” she explained. “And that’s likely to drag on our economic growth in the second quarter.”
Kaushik emphasized that despite the dip, the U.S. remains Canada’s most crucial trading partner — a status unlikely to change soon. Still, she acknowledged a silver lining: a noticeable increase in trade with other countries.
Canada boosted its exports of unwrought gold, silver, and platinum group metals by 30.1% to markets like the United Kingdom. At the same time, meat exports to Japan jumped by 13.3%. These specific gains helped lift overall export numbers.
Gold, in particular, played a big role. A spike in demand pushed up Canada’s gold exports, helping to mask weaknesses in other sectors. For instance, imports of motor vehicles and parts continued their slump, falling another 5.3% in May.
However, Kaushik cautioned that these gains — especially in gold — are concentrated in narrow sectors. “These are short-term bright spots, not long-term trends,” she said. “It’s just one month of data. We’ll need to watch the coming months closely.”
The future of Canada-U.S. trade remains a key variable. Talks to reach a new agreement resumed recently after President Trump halted negotiations over Canada’s digital services tax. Prime Minister Mark Carney later dropped the tax, and both leaders have committed to finalizing a deal by July 21.
What happens in these negotiations could set the tone for trade numbers in the months ahead.
