In July, Canada’s trade deficit with the rest of the world saw a significant reduction due to a recovery in exports and the impact of a strike at marine ports on the country’s west coast causing a heavy decline in imports.
According to Statistics Canada, the merchandise-trade deficit stood at 987 million Canadian dollars, equivalent to about $723.6 million. This figure defied the consensus forecast of a C$3.65 billion deficit predicted by economists at TD Securities. It is worth noting that June’s deficit was revised down by $1.19 billion to $4.92 billion.
The data agency revealed that although merchandise exports were hindered by the strike of port workers in British Columbia, they still managed to grow by 0.7% to C$60.42 billion in the latest month. This followed consecutive declines in May and June. On the other hand, imports took a sharp downfall of 5.4% to C$61.40 billion, marking the most significant decline since January 2022.
The strike, which commenced in July, disrupted regular port operations for over 13 days. This led to a substantial decrease in customs-based imports cleared in British Columbia ports, the largest decline between June and July since 2005. Additionally, exports from British Columbia ports were significantly lower. Nevertheless, this was partly offset by shipments of goods that were less affected by the strike.
The data agency has expressed concerns that Canada’s international trade could be impacted by the strike for several months to come as freight backlogs continue to be cleared.
Canadian Exports Show Mixed Results
Canadian exports of energy products experienced a slight decline of 0.3% for the month. However, this was offset by the strong performance of other sectors. Shipments of metal and non-metallic mineral products were negatively impacted due to a decrease in exports of unwrought gold. On the other hand, exports of aircraft and other transportation equipment and parts reached a new record high. Additionally, exports of canola more than doubled, leading to increased shipments of farm, fishing, and intermediate food products, according to Statistics Canada.
Exports to the U.S. Remain Strong
The United States continues to be Canada’s largest export market, with a significant increase of 1.5% in exports. In contrast, imports from the U.S. saw a slight decrease of 0.6%. As a result, Canada’s surplus with its neighboring country widened from C$6.44 billion to C$7.38 billion compared to the previous month.
Decline in Exports to Non-U.S. Countries
In July, exports to countries other than the U.S. decreased by 2.0%, as reported by the agency. Similarly, imports from abroad experienced a substantial drop of 13.2%, marking the sharpest decline since October 2026.
Volume-Adjusted Exports and Imports
When accounting for volume or price adjustments, exports overall had a marginal decrease of 0.2% in July. In contrast, imports declined by 4.3%.
Combined Goods and Services Trade
When considering both goods and services, Canadian exports increased by 0.5%, while imports decreased by 4.0%. Consequently, Canada’s trade deficit narrowed from C$6.01 billion in June to C$2.4 billion in July.
Canadian Economic Output
Following a contraction in June, the Canadian economy remained subdued in July. The decline in wholesale trade, coupled with hindrances caused by forest fires in various sectors including mining and rail transportation, contributed to this sluggish performance. In June, industry-level gross domestic product fell by 0.2%, and early indicators from Statistics Canada suggest that GDP remained essentially unchanged in July.