Canada’s trade surplus sharply narrowed to $769 million in July from $4.2 billion in June, driven by a decrease in gold exports to the U.S.
Total exports decreased 2.3 per cent in July, the first decline in six months, according to Statistics Canada on Thursday. Exports of metallic and non-metallic mineral products were one of the categories that posted the largest declines — 8.5 per cent — due to lower purchases of Canadian-held gold by foreign residents and lower gold shipments to the United States.
The agency also said falling gold prices contributed to the decline in exports.
Exports of energy products dipped 4.4 per cent in July due to a decrease in crude oil exports, both in prices and volumes. Crude oil prices bounced back in July, but they were below the average observed in June.
Total imports rose 2.2 per cent in July, driven by motor vehicles and parts, which rose by a record high of 11.4 per cent. Statistics Canada said July is usually the time when auto assembly plants temporarily close for maintenance, retooling and summer holidays, but the closures were less pronounced this year, especially in the U.S.
Andrew Grantham, a senior economist and executive director at CIBC Capital Markets, said the pullback in exports in July is a sign that economic growth is slowing in the third quarter after a second-quarter surge.
“A rise in imports is also technically a negative for gross domestic product (GDP), but likely represents restocking activity that will show up as a positive for inventories,” he said in a note on Thursday.
Many economists expect a temporary lift in August’s trade data due to front-running activity before the new Section 338 tariffs by the U.S. were implemented.
“Any resulting strength in August would likely borrow from future activity rather than signal firmer underlying demand,” Marc Ercolao, an economist at TD Economics, said in a note on Thursday. “Trade contributions are therefore likely to remain choppy in the quarters ahead as higher tariffs continue to disrupt cross-border flows.”
In real or volume terms, imports increased 2.2 per cent while exports declined 1.5 per cent.
Canada’s trade surplus with the U.S. narrowed to $5.9 billion in July from $10.3 billion in June, making it the lowest surplus since February 2026. Exports to the U.S. fell 6.6 per cent in July, while imports increased 1.8 per cent.
Canada’s trade deficit with non-U.S. markets narrowed to $5.1 billion in July from $6.1 billion in June and was the lowest deficit since January 2021.
Exports to non-U.S. markets rose 7.4 per cent to reach a record high of $25.6 billion in July, with higher shipments to the Netherlands, China and Germany contributing the most to the increase.
Imports from non-U.S. markets rose 2.8 per cent in July, with higher shipments from China being offset by lower shipments from Germany.
Ercolao said the escalation in Canada-U.S. trade tensions will have a direct hit on Canadian aggregate economic growth, but it should be “modest” given the tariffs’ targeted scope. However, affected industries will remain under pressure.
“More broadly, stalled negotiations and the risk of further retaliation could weigh on confidence and possibly result in the delayed business investment and hiring the Bank of Canada warned about yesterday,” he said.
Grantham said Canadian exports may continue to struggle unless a trade deal is reached.
Prime Minister Mark Carney told reporters on Tuesday that Canada will not return to the negotiating table until the U.S. government starts taking trade discussions seriously.
U.S. President Donald Trump and his administration have repeatedly attacked Canada on social media and in media interviews following the breakdown of trade negotiations in late August.
“For (the third quarter) as a whole, exports may be a slight negative for GDP following the large positive contribution in (the second quarter) and could continue to struggle in the fourth quarter unless a trade deal with the US is reached,” Grantham said.
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