Canada’s net foreign asset position strengthened in the second quarter of 2025, reflecting how closely our financial fortunes are tied to Wall Street and Bay Street. A strong rally in equity markets lifted the value of Canadian assets abroad, helping offset losses from currency shifts and the pressures of a record current account deficit.
The net international investment position rose by $42.8 billion to $1.86 trillion at the end of June. The gain marked a turnaround from the sharp $115.1-billion drop in the first quarter.
Much of the improvement came from stock markets. U.S. equities advanced 10.6 per cent and Canadian markets gained 7.8 per cent in the quarter, adding $259.4 billion to Canada’s balance sheet. Because equities make up more than two-thirds of our international assets but less than half of liabilities, rising share prices worked to Canada’s advantage.
The stronger Canadian dollar reduced the gains. The loonie appreciated 5.4 per cent against the U.S. dollar, cutting $212.9 billion from the value of foreign-currency holdings. With nearly two-thirds of Canadian assets denominated in U.S. dollars, our financial position is more vulnerable to exchange rate fluctuations than our liabilities, which are less heavily denominated in U.S. dollars.
In total, Canada’s international assets reached $10.47 trillion, up 1.8 per cent from the previous quarter. Liabilities grew by 1.7 per cent to $8.61 trillion, reflecting continued foreign interest in Canadian markets.
The United States remains at the centre of these ties. Net Canadian assets with the U.S. increased by $55.4 billion to $1.64 trillion, highlighting the deep cross-border financial integration that affects households and businesses. By comparison, Canada’s net position with the rest of the world slipped by $12.6 billion to $218.1 billion.
Another shift occurred in Canada’s gross external debt, which fell by $61.4 billion to $4.58 trillion, marking the first decline since early 2024. Government debt to foreign investors, however, continued to climb, rising for the seventh consecutive quarter to $849.9 billion.
Measured against the size of the economy, external debt accounted for 144.8 per cent of gross domestic product, down from 146.2 per cent three months earlier. While the numbers show resilience in the face of a stronger dollar, they also underline how much Canada depends on U.S. markets and global capital flows.
For Canadians and Americans alike, the figures reflect a shared financial ecosystem: when U.S. markets climb, Canadians’ balance sheets benefit; when currencies shift, the effects ripple both ways. It is a reminder that the border is not a barrier in financial terms; the prosperity of one side is deeply linked to the other.