Canada’s efforts to broaden trade beyond the United States appear to be bearing fruit, but economists warn it will be a long road before Canadian exporters settle at a new status quo.
Statistics Canada said Thursday, July 4, that the country’s merchandise trade deficit — the difference between how much we ship out and how much we bring in — narrowed to $5.9 billion in May as gold exports climbed higher.
The result compares with a trade deficit of $7.6 billion seen in April — a record high, which StatCan said Thursday was revised up from initial estimates of $7.1 billion.
Canadian exports got a boost in the early part of 2025 as businesses rushed to get ahead of U.S. tariffs, but that pull-forward has left weaker activity in April and May. After a relatively strong start to the year, real gross domestic product figures from StatCan show a 0.1% decline in April and early estimates suggest there was a similar decline in May.
“Despite what the numbers would say on a monthly basis, the fact is that the trade backdrop does remain a challenge,” said Shelly Kaushik, senior economist at BMO.
Excluding the bump from metal and non-metallic mineral products, total exports fell 1.2% in May as exports to the United States dropped 0.9%.
StatCan said U.S. exports declined for the fourth consecutive month in May amid the ongoing trade dispute. Imports also fell for a third straight month.
Canada’s share of exports headed to the U.S. was 68.3% in May, down from the 2024 monthly average of 75.9%.
A StatCan spokesperson said this is the lowest proportion of exports heading south of the border since the agency started keeping track in 1997, excluding the pandemic years.
Kaushik said that, as it still accounts for more than two thirds of exports, the United States remains Canada’s biggest export market — and likely will for the foreseeable future.
Even with a variety of tariffs in place, particularly on steel and aluminum industries, Kaushik said that many businesses will still find it a better deal to sell their goods across the enormous Canada-U.S. land border rather than ship overseas or even cross-country.
“It’s just a matter the fact that they’re our largest neighbor, but they’re also the largest economy in the world,” she said.
“If this desire to diversify away from the United States is sustained, that’s still going to take many months or even years to do.”
StatCan said that exports to countries other than the United States rose 5.7% in the month to reach an all-time high.
Total exports were up 1.1% in May at $60.8 billion as exports of metal and non-metallic mineral products increased 15.1% in May.
Driving the change was a 30.1% increase in exports of unwrought gold, silver and platinum group metals and their alloys — a category composed mainly of unwrought gold.
Most of that increase was pegged to higher physical shipments of gold to the United Kingdom, StatCan said.
Total merchandise trade to nations other than the U.S. hit $47.6 billion in May, which the agency said was a third consecutive all-time high.
In addition to U.K.-bound gold, StatCan said higher shipments of crude oil to Singapore and unwrought aluminum and pharmaceuticals to Italy were offset by declines in exports to China.
Andrew DiCapua, principal economist with the Canadian Chamber of Commerce, said in a statement Thursday that trade diversification gains are “encouraging,” but the obstacles at the U.S. border won’t be undone quickly.
“The worst may be behind us, but the road back will likely be uneven,” he said.
At the G7 summit in Kananaskis, Alta., last month, Prime Minister Mark Carney and U.S. President Donald Trump agreed to hammer out a renewed trade pact with an eye to a July 21 deadline.
Kaushik noted previous deadlines in the trade dispute have come and gone with barely any clarity materializing since what she called the “peak” of uncertainty in April.
Though May’s trade figures mark an improvement from April, Kaushik said the monthly data can be volatile.
And while BMO expects there will be a bit more certainty on the trade front as the year goes on, she said Canada’s exporters are going to continue to struggle.
“I think the big picture still has it as pretty clear that trade is going to remain quite challenged with this highly uncertain trade environment,” Kaushik said. “That’s going to continue to be heavy weight on the Canadian economy.”
Meanwhile, total imports fell 1.6% in May to $66.7 billion as imports of metal and non-metallic mineral products dropped 16.8%. Imports of unwrought gold, silver, and platinum group metals plunged 43.2%.
In volume terms, total exports rose 0.7% in May, while total imports fell 0.6% for the month.
This report by The Canadian Press was first published July 3, 2025.
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