BMO Says Gold Partially Masks A Worsening in Canada's Trade

11:51 AM EST, 02/19/2026 (MT Newswires) -- Canada's merchandise trade deficit was chopped in half in December to $1.3 billion, a somewhat smaller gap than expected in this "bouncy" series, said Bank of Montreal (BMO) after Thursday's data.

On the surface, this looks to be a solid result, with exports posting a strong 2.6% month-over-month rise, while imports advanced 0.6%.

However, as has so often been the case over the past year, the export gain was flattered by a snap-back in gold sales. Excluding precious metals, exports actually sagged 0.7% in the month, noted the bank. Even so, the volume of overall exports did manage to rise 1.4% month over month, exactly matching the gain in real imports.

For all of Q4, real exports rose 2.1% (or 8.5% a.r.), while imports were up just 0.3% (+1.4% a.r.), suggesting that net exports will make a contribution to overall gross domestic product growth in the quarter, pointed out BMO.

With the December data in hand, the bank now also has the full-year tally for 2025, a year that was marked by extreme trade uncertainty and U.S. tariffs.

Exports to the U.S. fell 5.8% for all of 2025, in turn cutting the share of Canadian exports to that economy by more than four percentage points to 71.7% from 75.9% in 2024. In a similar vein, imports from the U.S. dropped 2.9%, clipping the share to 58.8% from 62.3%, the lowest in decades.

The steeper drop in exports shaved the bilateral surplus with the U.S. by about $20 billion to $81.6 billion. On the flip side, trade with the rest of the world marched on, although the surge in gold prices distorts that picture. Deficits with China and the European Union were almost unchanged for all of 2025, but the global trade gap widened to $31.3 billion from $7.2 billion the prior year, only slightly offset by the largest surplus on services in 45 years of records ($4.4 billion).

The surging value of gold exports partially masked a deterioration in Canada's net trade in 2025, as U.S. tariffs weighed on exports, according to BMO. At around 1% of GDP for both the merchandise trade deficit and the current account gap overall, the imbalances aren't overly concerning.

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, added the bank.

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