Canada's Trade Deficit Widens in August, Progress on Trade Recovery Temporarily Stalls, Says TD

09:38 AM EDT, 10/07/2025 (MT Newswires) -- Canada's trade deficit widened from a revised $3.8 billion in July to $6.3 billion in August, said TD after Tuesday's data.

Exports in August pulled back 3% month-on-month after three consecutive monthly gains, noted the bank. The contraction was driven by both a fall in exports to the United States (-3.4% month over month) and to non-U.S. markets (-2.0% month over month).

Compositionally, eight of 11 product categories fell, led by the highly volatile exports of unwrought gold to the U.S. (-11.8% month over month). Exports of industrial machinery, equipment and parts (-9.5% month over month) and forestry products (-10.1% month over month) were also major detractors.

Goods imports, on the other hand, were up 0.9% month over month in August, but also heavily influenced by movements in unwrought gold, which pushed imports of metal and non-metallic minerals up 24.2% month over month.

Outside of this, six of 11 product groups saw decreases on the month, with energy exports (-12.8% month over month) providing the biggest counterforce.

In volume terms, merchandise exports were down 2.8% month over month while imports also decreased, although by a smaller 0.3% month over month.

Canada's merchandise trade surplus with the U.S. narrowed by $1 billion to $6.4 billion in August.

Canada's export-gaining streak reversed course in August, wiping out most of the progress the country has seen since April, pointed out TD. With two months of data in the quarter, and despite a weak month for exports, net trade is still expected to make a modest contribution to Q3 gross domestic product growth after an exceptionally weak showing the quarter prior.

There is still considerable uncertainty on the trade front in the near-term, but the bank believes that the peak negative impacts from U.S. tariffs are in the rearview mirror.

Prime Minister Mark Carney heads to the White House on Tuesday to discuss the current state of trade. Tariffs are likely to be at the top of the agenda, but whether TD sees any further relief is anyone's guess.

Looking to next year, the USMCA trade deal review is set to dominate the trade agenda, potentially bringing with it another layer of uncertainty, according to the bank.

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