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Economic News

Canada: A Lower Trade Deficit in March Despite New Tariffs

May 6, 2025
LJ Valencia
Economic Analyst

Highlights

  • Canada’s international merchandise trade balance narrowed to a $0.5B deficit in March (graph 1). This was significantly below the consensus expectation for a deficit of $1.7B. See table for more details.
  • Goods exports were down by 0.2% m/m in March—a second consecutive monthly decline—while imports declined by 1.5% after rising for five consecutive months. In real terms, exports were up 1.1% while imports fell by 1.0%.
  • On a quarterly basis, nominal exports and imports rose to record highs as a result of annualized 26.2% q/q and 22.3% growth, respectively. After adjusting for prices, real exports and real imports rose by 10.3% and 9.5% in the quarter, respectively.
  • Canada’s trade surplus with the US fell from $10.8B to $8.4B in March, coinciding with new tariffs on goods imported into the US (graph 2). Meanwhile, the trade deficit with countries other than the United States narrowed from $12.2B to $9.0B in the month.
  • The services trade deficit declined further in March, to $435M. Service exports rose by a modest 0.3% while service imports decreased by 0.9%.

Comments

Six out of 11 export categories experienced a decline in March, motivated by lower prices. Consumer goods exports fell the most (-4.2% m/m) with lower shipments to US and foreign markets. Exports of energy products also declined further (-2.2%) due to lower exports of natural gas, nuclear fuel and other energy products. These declines were offset by a rise in motor vehicles and parts exports, up by 7.7%, a reflection of US auto manufacturers responding ahead to new US tariffs on foreign-made vehicles which were implemented in early April.

On the import side, Statistics Canada again noted that the CBSA's Assessment and Revenue Management (CARM) initiative may significantly revise import values from October 2024 to March 2025, so import data should be viewed cautiously. The largest moves were the imports of metal and non-metallic mineral products (-15.8%) as a result of Canadian counter-tariffs on steel and aluminum. Energy products also contributed to lower import numbers in March (-18.8%).

Implications

Canada posted a lower-than-anticipated $0.5B trade deficit in March, with Canadian firms increasing exports to other foreign markets as new US tariffs took effect. As a result, net exports are expected to add 0.6 percentage points to Q1 growth, leading to annualized real GDP growth of around 1.7%. This is broadly in line with the Bank of Canada's April Monetary Policy Report forecast, with modest inventory drawdown being offset by higher domestic demand.

Looking ahead, we expect current tariffs and ongoing threats to heighten trade volatility, heavily influencing growth and the decisions of Canadian central bankers. Consequently, our latest Economic and Financial Outlook External link. points to a mild recession in Canada in 2025, starting as early as Q2, as a result of falling exports to the US combined with weak consumption and business investment. 

NOTE TO READERS: The letters k, M and B are used in texts, graphs and tables to refer to thousands, millions and billions respectively. IMPORTANT: This document is based on public information and may under no circumstances be used or construed as a commitment by Desjardins Group. While the information provided has been determined on the basis of data obtained from sources that are deemed to be reliable, Desjardins Group in no way warrants that the information is accurate or complete. The document is provided solely for information purposes and does not constitute an offer or solicitation for purchase or sale. Desjardins Group takes no responsibility for the consequences of any decision whatsoever made on the basis of the data contained herein and does not hereby undertake to provide any advice, notably in the area of investment services. Data on prices and margins is provided for information purposes and may be modified at any time based on such factors as market conditions. The past performances and projections expressed herein are no guarantee of future performance. Unless otherwise indicated, the opinions and forecasts contained herein are those of the document’s authors and do not represent the opinions of any other person or the official position of Desjardins Group.