Containers line the Port of Montreal. Canadian exports to the United States slipped for a fourth consecutive month in May, decreasing by 0.9 per cent, as the White House targets some sectors of the Canadian economy with punishing tariffs.Christinne Muschi/The Canadian Press
Canada’s trade deficit with the world narrowed in May from a record high the previous month, but tariffs continued to weigh on exports to the United States, raising the stakes for trade negotiations between Ottawa and Washington.
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.
The deficit in April was revised to $7.6-billion, marking Canada’s largest on record and wider than previously reported.
“While the trade figures improved a bit in May from a tough April, the deep shortfall highlights the uncertainty facing Canadian importers and exporters,” wrote Bank of Montreal senior economist Shelly Kaushik in a client note.
Exports to the United States in May slipped by 0.9 per cent, following a whopping 16-per-cent decline in April. It was the fourth consecutive monthly decline 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.
Statscan said 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.)
Canada’s total exports, which rose 1.1 per cent, were boosted by a sharp increase in gold shipments to Britain, said Alexandra Brown, a North America economist at Capital Economics, in a client note.
“If we exclude the volatile metal and non-metallic mineral product exports, remaining exports were down 1.2 per cent in May,” she said.
The trade challenges Canadian exporters are experiencing owing to U.S. tariffs are already slowing down the Canadian economy. Forecasters are expecting the economy shrank in the second quarter, and for the trade challenges to continue exerting upward pressure on the jobless rate.
“The sizable decline in exports in April means that net trade will be a drag on growth over the second quarter as a whole and will remain under pressure until trade negotiations progress,” wrote CIBC senior economist Katherine Judge in a client note.
Total 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.
Meanwhile, the U.S.’s trade deficit widened in May to US$71.5-billion, up from US$60.3-billion in April, the U.S. Commerce Department’s Bureau of Economic Analysis reported on Thursday.
The impact of the Canada-U.S. 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.
The federal agency said higher exports of unwrought gold to Britain, crude oil to Singapore and unwrought aluminum and pharmaceutical products to Italy were partially offset by a decline in canola and crude oil exports to China.