- Canada’s trade balance moved further into surplus territory in May, widening to $4.2 billion from $3.4 billion the prior month.
- Exports in May moved higher by 0.9% month-on-month (m/m) following sturdy gains over the past three months. Exports of metal ores and non-metallic minerals, led by sulphur shipments (+37% m/m) and aluminum (+50.7%) contributed most to the headline increase. Sturdy gains in consumer goods exports (+3.9% m/m) and basic and industrial chemical, plastic, and rubber products (+5.6% m/m) were partially offset by a 2.0% m/m pullback in energy exports following a robust April performance.
- Goods imports edged lower by 0.2% m/m in May, reversing April’s gain. However, the decrease was narrowly based, with imports of unwrought gold, silver, and platinum falling by 33% m/m. Otherwise, 9 of 11 subsectors booked a gain, including consumer goods (+3.5% m/m), industrial machinery and equipment (+2.8% m/m) and aircraft/other transportation equipment (+5.7% m/m).
- In volume terms, exports were flat while imports nudged higher by 0.4% m/m.
- Canada’s merchandise trade surplus with the United States widened to $11.6 billion in May to $10.3 billion in April. Exports to non-U.S. destinations continued to moderate in May, dipping 0.3% m/m.
Key Implications
- With data through the first two months of the quarter, trade activity remains consistent with net exports shifting from a Q1 drag to a modest tailwind for real GDP growth in Q2. With flows still heavily influenced by volatile components (notably oil, gold and autos), trade contributions are likely to remain choppy through the remainder of the year.
- Beyond the monthly data, Canada’s trade backdrop remains fragile amid elevated policy risk. The July 1 CUSMA deadline passed without renewal, shifting the agreement into rolling annual reviews and prolonging uncertainty amid unresolved issues related to steel, aluminum, autos, lumber, procurement, etc. This leaves risks modestly tilted to the downside even as solid U.S. demand offers a partial offset.
