Canada’s trade deficit narrows in May, exports to U.S. decrease for fourth straight month

Canada’s trade deficit with the world narrowed in May from a record high the previous month, as tariffs continued to weigh on exports to the United States.

Statistics Canada reported on Thursday that the country’s trade deficit, which reflects the difference between its exports and imports, fell to $5.9-billion from $7.6-billion.

Exports to the United States slipped for a fourth consecutive month, decreasing by 0.9 per cent, as the White House targets some sectors of the Canadian economy with punishing tariffs.

This includes levies on steel, aluminum and automobiles, as well as on all goods that don’t comply with the continental free-trade agreement’s rules of origin. Last month, Mr. Trump doubled tariffs on steel and aluminum to 50 per cent.

U.S. tariffs are already slowing down the Canadian economy and forecasters expect it shrank in the second quarter.

The federal agency noted that the share of exports destined for the U.S. was 68.3 per cent in May, one of the lowest proportions on record. (The monthly average in 2024 was 75.9 per cent.)

The impact of the trade spat is particularly apparent in the automotive sector, where tariffs are slowing down trade in both directions.

Imports of motor vehicles and parts fell by 5.3 per cent, following an even sharper decline in April.

Imports of passenger vehicles and light trucks decreased to their lowest level in two years, falling by 9.7 per cent in May, as Canada implemented reciprocal auto tariffs on the U.S.

Meanwhile, exports to countries other than the U.S. continued to rise last month, increasing by 5.7 per cent and reaching a record high.

A sharp rise in gold exports drove up total exports to the world by 1.1 per cent, while imports fell by 1.6 per cent, marking the third consecutive decrease.

Prime Minister Mark Carney is trying to negotiate an economic and security agreement with the United States by July 21, in hopes of securing a break from tariffs for Canadian businesses.

U.S. President Donald Trump broke off talks last week over Canada’s implementation of a digital services tax targeting tech giants like Google and Netflix. However, talks have since resumed after Mr. Carney announced that the federal government would rescind the tax.