April's $7.1B merchandise trade deficit was the largest on record

Canada posted a $7.1 billion merchandise trade deficit in April — the largest on record — as exports fell sharply in the face of U.S. tariffs.

The April figures follow a $2.3 billion deficit in March, according to Statistics Canada, a period that saw businesses stocking up on inventory ahead of widespread U.S. tariffs, which kicked in the following month. 

"The Canadian goods trade deficit hit a record high in April in an ugly-looking round of data. Still, the monthly trade numbers were expected to be highly volatile [before and after] the March/April U.S. tariff announcements," wrote Nathan Janzen, assistant chief economist at RBC Economics, in a note to clients.

Canada's overall exports fell 10.8 per cent to $60.4 billion in April, their lowest level since June 2023, said Statistics Canada. The data agency found notable declines in trade-exposed sectors, including:

• Motor vehicles and parts, which saw a 17.4 per cent drop in exports.
• Consumer goods, which saw a 15.4 per cent drop in exports.
• Energy products, which saw a 7.9 per cent drop in exports.

The trade data is consistent with Canadian GDP growth seen in the first quarter, wrote Janzen. The annualized rate beat expectations largely due to a bump in net trade and an "import-led jump" in equipment investment, he added.

RBC expects growth to slow sharply in the second quarter — a sentiment echoed by Bank of Canada governor Tiff Macklem on Wednesday during the central bank's interest rate announcement.

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But the April figures aren't simply showing trade numbers normalizing after a volatile period, according to Pedro Antunes, chief economist at the Conference Board of Canada.

"We're seeing a decline in export activity from below-normal levels," he said. "When we look at the overall trade numbers in terms of merchandise trade or trading goods, this is not a good news story.

"We're hopeful that this will only last a quarter — and we're hopeful about that because it's just as bad for the U.S. economy, this trade war, as it is for Canada's."

Canadian exports to U.S. fell 15.7%

Total imports fell 3.5 per cent in April to $67.6 billion, as imports of motor vehicles and parts lost 17.7 per cent and industrial machinery, equipment and parts dropped 9.5 per cent.

In real or volume terms, total exports fell 9.1 per cent in April, while imports fell 2.9 per cent that month.

Canada posted a merchandise trade surplus with the U.S. of $3.6 billion in April, the smallest surplus with the country's largest trading partner since December 2020. The result came as exports to the U.S. fell 15.7 per cent, and imports from the U.S. dropped 10.8 per cent.

Meanwhile, Canada's trade deficit with other countries was $10.7 billion in April compared with $9 billion in March.

Exports to countries other than the U.S. rose 2.9 per cent to $18.3 billion in April, while imports from non-U.S. countries gained 8.3 per cent to hit a record $29 billion.