Canada’s U.S. Trade Surplus Reaches $12.3 Billion as Tariff-Exposed Volumes Fall

Canada’s merchandise trade surplus with the United States increased to $12.3 billion in September from $12.1 billion in August, even after new Section 338 tariffs took effect in late August. Exports to the U.S. rose 0.7 per cent during the month, led by higher shipments of unwrought gold and crude oil, while imports from the U.S. increased 0.4 per cent, principally because of processing-unit shipments. [1]

The bilateral result masks a weaker underlying export picture. Canada’s total merchandise exports rose 0.2 per cent in September, but exports measured in real, or volume, terms fell four per cent. Eight of 11 product sections recorded declines, including consumer goods, electronic and electrical equipment, industrial machinery, motor vehicles and parts, and forestry products and building materials. [1]

The tariff measures cover roughly $27.6 billion in Canadian goods, including automobiles, dairy and alcohol. The Financial Post reported that goods such as plastics, furniture and electronics that had previously been exempt from Section 232 tariffs under CUSMA also became subject to 50 per cent levies. KPMG Canada economist Vincent Chartray said preliminary analysis indicated U.S. imports of newly tariffed Canadian goods fell by nearly half, although some of the decline may reflect purchases being moved forward into August before the tariffs began. [1]

Automotive trade also showed continued strain on the import side. Canadian imports of motor vehicles and parts dropped 9.1 per cent in September after a 9.3 per cent decline in August. Lower passenger-car and truck imports made the largest contribution, with supply problems causing unplanned production stoppages during September, according to the report. [1]

Energy and metals helped support the aggregate trade balance, but they did not establish a broad-based recovery across exposed manufacturing and resource sectors. Energy-product exports rose 8.2 per cent in September, and higher metal and non-metallic mineral shipments also aided the overall surplus. KPMG’s Chartray characterized the energy strength as a cushion against softer manufacturing exports and warned that continuing trade uncertainty could restrain exports and investment. [1]

Negotiations remain a potential source of relief but have not yet supplied policy certainty. The tariffs followed the collapse of Canada-U.S. trade talks, while Prime Minister Mark Carney said after speaking with President Donald Trump that negotiators would work in coming weeks toward a mutually beneficial agreement. TD Economics economist Marc Ercolao said a finalized deal would require substantially more work and that uncertainty could continue to weigh on business confidence, investment and hiring. [1]