Canada’s Trade Deficit Shrinks in July as U.S.-Bound Exports Rebound

Canada’s trade deficit narrowed in July, thanks to a rise in exports to the United States—driven largely by increased shipments of crude oil and passenger vehicles—according to data released by Statistics Canada on Thursday.

The country posted a merchandise trade deficit of C$4.94 billion ($3.57 billion) for the month, an improvement over June’s C$5.98 billion shortfall. However, it remains significantly larger than the deficit recorded in July last year. Analysts surveyed by Reuters had expected a slightly smaller deficit of C$4.75 billion.

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This marks Canada’s sixth straight monthly trade deficit since former U.S. President Donald Trump introduced tariffs affecting Canadian goods. Despite that, the trade balance has been gradually improving from a record-high deficit of C$7.6 billion in April.

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Exports to the U.S.—Canada’s largest trading partner, accounting for 76% of all goods exports last year—rose for the third consecutive month, climbing 5% in July. This growth was largely attributed to higher shipments of crude oil and passenger cars. Still, exports to the U.S. remained down more than 10% compared to July 2024.

At the same time, Canadian imports from the U.S. fell by 2.2%, helping to push Canada’s trade surplus with its southern neighbor to C$6.7 billion—an 80% increase from June and the highest level since March.

According to Statistics Canada, the share of exports heading to the U.S. increased to nearly 73% in July, up from 68% in May.

Despite the positive trend, economists warned that the export recovery is not yet complete.

“We haven’t completely reversed the trend yet,” said Ross Prusakowski, deputy chief economist at Export Development Canada (EDC). He noted that the recent uptick in energy and auto exports reflects a rebound from exceptionally low levels earlier in the year.

So far in 2025, Canadian exports to the U.S. are down 2.9% compared to the same period in 2024, while exports to other countries have climbed 14%, highlighting shifting dynamics in global trade.