Canada's Trade Surplus Narrows Sharply in July Ahead of New US Tariffs

Canada's trade surplus contracted sharply in July, dropping to C$769 million from a four-year high of C$4.2 billion in June, according to data released Thursday. The decline came as exports of energy and metal products fell while imports rose, just weeks before a major escalation in the trade dispute with the United States.

Exports dropped 2.3% in July, while imports increased 2.2%. The decrease in exports was led by energy products, which account for nearly a quarter of Canada's total exports, with 95% typically flowing to the US. The value of energy exports fell 4.4%, marking a third consecutive monthly decline, as crude oil exports dropped 5.5% on lower prices and volumes.

Exports of metal and non-metallic mineral products also shrank by 8.5% in July, following a 15.8% increase the previous month. Total exports fell to C$76.14 billion from C$77.96 billion in June. However, excluding metals and energy, exports rose 0.6%, with aircraft and other transportation equipment exports surging 34.9%.

Imports rose to C$75.37 billion, up from C$73.76 billion, marking a sixth consecutive monthly increase. The rise was driven by an 11.4% increase in motor vehicle and parts imports, mainly from the US.

Exports to the US fell 6.6% in July, while imports from the US rose 1.8%, shrinking Canada's trade surplus with its largest partner by over 40% to C$5.9 billion. The US accounted for 66.35% of Canada's total exports in July, down from 69.39% in June and 72.64% a year earlier, reflecting a gradual diversification away from the US market.

Exports to non-US countries rose 7.4%, while imports increased 2.8%, narrowing Canada's non-US trade deficit to C$5.1 billion from C$6.1 billion in June.