Canada's merchandise trade deficit widens, weighing on GDP growth in Q2

Canada's merchandise trade deficit widened in June due to a faster growth in imports compared to exports. This contributed significantly to the country's GDP growth in Q2, according to National Bank. The widening trade deficit highlights the challenges facing Canada's economy, which relies heavily on international trade.

Canada's merchandise trade deficit widened in June 2025, according to data released by Statistics Canada. The trade deficit, which measures the difference between the value of imports and exports, expanded from $5.5 billion in May to $5.9 billion in June. This widening trade deficit was driven by a 1.4% increase in imports, while exports grew by only 0.9% [1].

The increase in imports was largely due to a one-time high-value shipment of industrial machinery, equipment, and parts, which contributed to a 27.7% increase in the category. Excluding this shipment, total imports were down by 1.9% [1]. Meanwhile, exports of energy products, such as crude oil and refined petroleum energy products, contributed significantly to the overall export growth, with crude oil exports increasing by 3.6% and refined petroleum energy products by 19.0% [1].

The widening trade deficit comes at a time when Canada's economy is grappling with challenges. According to the National Bank, the country's GDP growth in the second quarter was significantly impacted by the trade deficit. The National Bank's report highlights that Canada's heavy reliance on international trade makes it vulnerable to global economic fluctuations [2].

Despite the challenges, the second quarter of 2025 saw a 2.2% increase in total exports compared to the same period in 2024, largely driven by strong performance in the first quarter. However, the second quarter saw a decline in exports, with energy products, motor vehicles and parts, and consumer goods contributing the most to the decline [1].

The implementation of the Canada Border Services Agency (CBSA) Assessment and Revenue Management (CARM) digital initiative has also impacted Canada's import statistics. The initiative has led to revisions in the May merchandise export and import data, with exports revised upward from $60.8 billion to $61.2 billion [1].

In conclusion, while Canada's merchandise trade deficit widened in June, the country's exports showed signs of recovery in the first half of the year. The challenges posed by the widening trade deficit and the impact of global economic fluctuations underscore the need for robust economic policies to support Canada's international trade sector.

References:
[1] https://www150.statcan.gc.ca/n1/daily-quotidien/250805/dq250805a-eng.htm
[2] National Bank Report on Canada's GDP Growth in Q2 2025