Update: Canada Net Trade Likely To Be a Negative For Q1 GDP, TD and CIBC Say

09:34 AM EDT, 04/02/2026 (MT Newswires) -- Net trade will likely act as a drag on first-quarter real GDP growth in Canada, both TD Bank and CIBC said after the release of trade data for February on Thursday.

Statistics Canada reported the country's trade deficit with the world widened to $5.7 billion in February from $4.2 billion in January, the largest deficit since August of last year.

Economist Marc Ercolao at TD noted total trade activity in February was "strong across the board", representing a sharp reversal from the prior month. But with import volumes outpacing exports over the last two months, he said net trade will like "act as a drag" on Q1 real GDP growth. Still, Ercolao added, the recent "meteoric" rise in oil prices will boost nominal trade momentum in March and April, which should help narrow Canada's trade deficit.

Ercolao noted the upcoming CUSMA review, due by July 1, is a key risk to the Canadian outlook. "After a quiet few months, Canadian representatives have started re-engaging U.S. counterparts, though substantial progress has yet to be achieved. Our base case is that the tri-lateral agreement remains in place, though uncertainty will continue to weigh on business confidence and investment," he wrote.

While agreeing the net trade figure released Thursday by Statistics Canada will likely be "a negative" for Q1 GDP due to a surge in imports, Andrew Grantham, senior economist at CIBC Capital Markets, said that's also "likely a sign of restocking following the inventory drawdown that was a large drag on GDP in the previous quarter."

Grantham noted two-way trade rebounded strongly in February but, with import growth eclipsing that of exports, the trade deficit widened unexpectedly. He noted the $5.7 billion shortfall was wider than a revised $4.2 billion deficit in the prior month and came against forecasts for a narrowing to $2.5 billion. Imports surged by 8.4% and exports increased 6.4%.

Grantham said trade in gold was once again influential in driving the headline figures, although excluding that trade, imports and exports were still up by a solid 5.8% and 5.5% respectively. He noted export growth was headed by a rebound in auto trade (+24% vs -21% in January) as prolonged retooling shutdowns negatively impacted the prior month, although the other broad categories of exports also posted increases.

In volume terms, Grantham noted exports were up by about 5% on the month, "but still remain depressed relative to levels seen in 2024, showing that U.S. tariffs and related uncertainty are still negatively impacting economic activity if you look through the monthly volatility."

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