Canada’s trade deficit narrows as tariff turmoil rumbles on

The ongoing trade war with the United States pushed Canada’s merchandise trade deficit lower in May as exports to the US dipped, even despite a jump in overall exports.

Statistics Canada said the merchandise trade deficit fell to $5.9 billion and exports to the US slid by 0.9% in May – although total exports were up by 1.1%, the first time in four months they’ve risen.

The news arrives with no end in sight to the trade tussle launched by US president Donald Trump shortly after his inauguration in January. Trump said last week he was calling off trade negotiations with Canada because of a planned imposition of a digital services tax on US companies, although talks are recommencing after the Canadian government scrapped that policy.

Canada’s share of total exports headed to the US fell to 68.3% in May – one of the lowest proportions on record between the two trading partners. By comparison, Canada sent 75.9% of its exports to the US on average each month in 2024, highlighting a shift in trade flows amid strained bilateral relations.

In April, US importers rushed to stockpile Canadian goods ahead of Trump’s planned tariffs – seeing the trade deficit swell to $7.1 billion that month compared with $2.3 billion in March.

Total imports fell by 1.6% in May, slipping for the third month in a row, spurred mainly by a decline in imports of goods produced in the US.