Canada’s trade deficit last year widened to C$31.3 billion ($22.9 billion), marking the largest annual shortfall on record outside of the Covid-19 pandemic, as US tariffs hammered key export sectors.
Annual exports last year decreased by 0.2%, driven by declines across most product groups, Statistics Canada reported on Thursday. Exports to the US tumbled 5.8%.
A strong run-up in gold prices has masked the true damage of the trade war. Canadian exports of unwrought gold, silver and platinum group metals and their alloys increased by a whopping 41.7% last year. Excluding this category, exports fell 3%.
The annual international merchandise data illustrates how President Donald Trump’s tariffs have upended Canada’s most important trading relationship, wreaking havoc on exporters and forcing some of them to find alternative destinations for their products. The proportion of Canada’s goods exports going to the US fell to below 72%, from around 76% the previous year.
With the exception of the year 2020, when public health measures to halt the spread of a new virus slowed cross-border business activity, Canada’s total trade deficit was the largest in data going back to 1988.
The US released its own trade data at the same time, showing a full-year deficit of $901.5 billion, still one of the largest in data back to 1960.
The yield on the two-year Canadian government bond fell about a basis point to 2.447% after the release, while the loonie weakened slightly to trade at C$1.3709 per US dollar as of 9:25 a.m. in Ottawa.
Canadian imports from the US decreased by 2.9% last year. Overall, Canada’s trade surplus with its southern neighbor narrowed to C$81.6 billion in 2025 from C$101.3 billion the prior year.
Exports to countries excluding the US rose 17.2% in 2025 while imports increased 12.4%. Still, Canada’s trade deficit with countries other than the US widened to C$112.9 billion from C$108.4 billion.
“At around 1% of GDP for both the merchandise trade deficit and the current account gap overall, the imbalances aren’t overly concerning,” Doug Porter, chief economist at Bank of Montreal, told investors in a report.
“The volume of trade stabilized through the second half of last year after a heavy blow in the spring, with net exports on track to support GDP moderately again in Q4.”
Uneven Recovery
On a monthly basis, Canadian exports increased by 2.6% in December, while imports rose by 0.6%. Canada’s trade deficit narrowed from C$2.6 billion in November to C$1.3 billion that month, lower than the C$2.2 billion deficit economists surveyed by Bloomberg were expecting.
Excluding the product group that contains unwrought gold, the trade deficit was C$7.1 billion in December. That month, 67.4% of Canadian exports went to the US, the lowest on record outside the pandemic.
The December data were “solid,” but the details confirm the recovery in trade since early last year has been volatile and uneven, Marc Ercolao, economist at Toronto-Dominion Bank, said in a report to investors.
“All told, exports outpaced imports in the fourth quarter, which should act as a tailwind to Q4 real GDP growth,” he said.
The upcoming review of the US-Mexico-Canada Agreement will be in full focus over the coming months, Ercolao said. “While the base case is that the agreement remains in place, scenarios involving US withdrawal could expose Canadian exporters to significantly higher tariffs and prolonged policy uncertainty.”
While exports to countries other than the US reached a record high in December, that was flattered somewhat by increased gold shipments to the UK, pointed out Andrew Grantham, economist at Canadian Imperial Bank of Commerce.
“Overall export volumes remain lower than they were throughout most of 2024, due to the impact of US tariffs and related trade uncertainty,” he said in a report to investors.
Written by: Nojoud Al Mallees — With assistance from Mario Baker Ramirez and Melissa Shin @Bloomberg
The post “Canada’s 2025 Trade Deficit Widest on Record Excluding Pandemic” first appeared on Bloomberg