BMO Says Canada's July Trade Data Shows Weakness but Not Too Bad

10:13 AM EDT, 09/04/2025 (MT Newswires) -- Canada's merchandise trade deficit narrowed to C$4.9 billion in July from $6 billion in June as exports rose 0.9% from the prior month, extending a three-month string of modest gains after the April plunge, Bank of Montreal (BMO) said.

Auto exports climbed 6.6% in July, helped by seasonal adjustment. BMO said typical July work stoppages were less severe this year as tariffs are already weighing on production.

Metal and non-metallic mineral products fell 8%, dampened by tariffs and a continued pullback in gold after a May spike.

Imports slipped 0.7% in July, led by an 18.8% drop in industrial machinery and equipment following a large one-time order to an oil project in Newfoundland and Labrador in June. Gains in other categories partly offset the decline, including aircraft equipment and parts (+11%), farm and fishing (+7.8%), and energy (+3.9%).

BMO said this points to decent underlying domestic demand, which could pick up in September after the removal of most counter-tariffs on United States imports.

In volume terms, exports rose 0.7% and imports fell 1.8%. The bank said it expects net exports to reverse course in the third quarter.

Separately, Canada's services trade balance improved to a $500 million surplus in July from a $200 million deficit in June, supported by a larger surplus in commercial services. The travel surplus also widened to its largest since January as spending by international visitors to Canada rose faster than spending abroad by Canadians. Overall, Canada's trade deficit narrowed to $4.4 billion in July from $6.2 billion.

BMO said the July trade report reflected one-time factors and adjustments that highlighted volatility in monthly data. Still, underlying flows were relatively solid given ongoing trade uncertainty and could set the stage for modest economic growth in the third quarter.

MT Newswires does not provide investment advice. Unauthorized reproduction is strictly prohibited.