Canada's Trade Deficit Narrows in July as Exports Continue Recovery, Says TD

09:32 AM EDT, 09/04/2025 (MT Newswires) -- Canada's trade deficit narrowed from a revised $6.0 billion in June to $4.9 billion in July, said TD after the release of the data on Thursday.

Exports rebounded for a third consecutive month, although modestly (+0.9% month over month), as a jump in exports to the United States (+5.0% month over month) was offset by an 8.6% month-over-month decline to non-U.S. markets, noted the bank.

Export growth was seen in seven of 11 product sections, with shipments of energy products (+4.2% month over month) and motor vehicle and parts (+6.6% month over month) making the largest contributions. Lower exports of metal and non-metallic mineral products (-8.0%) partially offset July's overall increase.

Goods imports, on the other hand, were down 0.8% month over month in July. The decrease was narrowly-based as imports of machinery, equipment and parts (-18.8% month over month) unwound from last month's elevated print. Otherwise, 10 of 11 product groups saw increases.

In volume terms, merchandise exports were up 1.6% month over month while imports decreased by 0.9% month over month in June.

Canada's merchandise trade surplus with the U.S. widened significantly to $6.7 billion as of July, as exports gained and imports fell.

As expected, Canadian exports continue to recover from April's five-year low, stated TD. The combination of rising exports and falling imports on the month should allow net trade to bounce back after an exceptionally weak showing in Q2, providing a positive tailwind to total gross domestic product growth.

There is still considerable uncertainty on the trade front for the quarter ahead, added the bank. On the plus side, the Canadian government recently removed counter-tariffs on U.S. imports, which should aid in more positive discussions with U.S. President Donald Trump around the state of trade.

On the other hand, Canadian export rotation into non-U.S. markets may not have the same staying-power as exports abruptly shifted back to the U.S. in July.

Looking ahead, TD still expects Section 232 and IEEPA tariffs on Canadian exports to remain in place over the coming quarters, with the USMCA trade deal renegotiations looming next year.

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