BMO Sees Canada's Trade Data Remaining Under Pressure From Tariffs, Geopolitical Uncertainty

10:06 AM EST, 01/08/2026 (MT Newswires) -- Canada's merchandise trade balance deteriorated to a $600 million deficit in October from a $200 million surplus in September, said Bank of Montreal (BMO) on Thursday.

While small in size, this marks the eighth deficit in the first 10 months of 2025, noted the bank.

Exports increased 2.1% month over month, even after a 6.7% jump in September. However, the October gain was concentrated in gold - excluding unwrought gold/silver/platinum and their alloys (+47.4% month over month), while exports declined 2.5%.

Auto exports (+4.1%) were up for the second straight month after following a see-saw pattern earlier in 2025, pointed out BMO. Energy exports fell 8.4%, weighed by lower oil prices and shutdowns in some United States refineries. Notably, for the first time on record, exports of precious metals, at $8.7 billion, were larger than both crude oil exports ($8.6 billion) and motor vehicles and parts ($7.8 billion).

Meantime, imports were up 3.4% month over month. The increases were broad-based, driven by electronic equipment (+10.2%) and industrial machinery (+5.7%), suggesting some firming in business investment.

The trade surplus with the U.S. narrowed sharply from $8.4 billion to $4.8 billion, as imports (+5.3%) snapped a three-month streak of declines, while exports (-3.4%) fell. Other than the months of peak tariff uncertainty (spring-summer 2025), this is the smallest bilateral surplus in the post-pandemic period.

In volume terms, exports were up a smaller 1.7% month over month while imports rose 2.8%. Still, a decent starting point from a strong September suggests net exports could add to real gross domestic product growth in Q4, although it's still early days, stated the bank.

Separately, the services trade surplus widened a touch from $400 million to $500 million. Altogether, Canada's total trade balance went from a $607 million surplus to a modest $59 million deficit.

The "mild" deterioration in the trade balance was expected and was partially offset by ongoing strength in gold exports, added BMO. While some evidence of diversification can be seen in the data, trade flows will continue to be under pressure as tariffs and geopolitical uncertainty remain elevated.

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