Canada’s merchandise trade has shifted from a surplus to a deficit in February, marking a notable change from the previous month’s positive trend. According to the latest data, the merchandise trade balance experienced a $4.6 billion swing, moving from a surplus of $3.1 billion in January to a deficit of $1.5 billion in February.
The drop in trade balance is attributed to a 5.5% decrease in merchandise exports. This follows a 15.9% increase in exports from September 2024 to January 2025, showcasing the volatility that has defined recent trends in Canadian international trade. The February dip marks the first decrease in exports after four consecutive monthly increases.
A closer examination reveals that 10 of the 11 product categories experienced declines. Energy products saw the most significant drop, with exports falling 6.3%, the first such decrease since September 2024. Subcategories like crude oil (-4.2%), refined petroleum products (-15.3%), coal (-26.9%), and natural gas (-8.9%) all contributed to this downturn, driven mainly by lower prices and reduced demand.
In particular, Canada’s automotive sector also saw a sharp decline. Exports of motor vehicles and parts dropped by 8.8%, primarily due to a decrease in the export of passenger cars and light trucks, which fell by 15.3%. The decline follows a peak in January due to trade uncertainties. The unity of the auto manufacturing industry with the U.S. market remains a key factor, as nearly 94% of Canadian vehicle exports go to the United States.
Other sectors that experienced declines include metal and non-metallic mineral products, with a 6.6% drop in exports, largely due to lower shipments of unwrought gold and other precious metals. The forestry products sector also saw a significant decline, with exports falling by 10.8%, driven primarily by a drop in lumber and sawmill products.
Exports of aircraft and transportation equipment rose by 9.7%, driven by a 29.6% increase in aircraft shipments, particularly business jets to the U.S.
While exports struggled, imports saw a modest increase of 0.8% in February, marking the fifth consecutive month of growth. The largest contributors to the rise in imports were motor vehicles and parts, industrial machinery, energy products, and metal products. Notably, energy imports grew by 5.2%, while imports of motor vehicles and parts increased by 5.8%. In volume terms, however, imports remained essentially unchanged, suggesting a stabilization in demand.
Statistics Canada noted that delays in data collection, due to the ongoing Canada Border Services Agency (CBSA) Assessment and Revenue Management (CARM) initiative, led to estimates being added to certain product categories. This has raised caution about the potential for revisions in future reports, particularly for merchandise imports.
The United States continues to be Canada’s largest trading partner and ally, and February’s results reflect a mixed impact from the evolving trade relationship. Exports to the U.S. fell by 3.6%, or $2.1 billion, reversing a three-month growth streak. However, Canada’s merchandise trade surplus with the U.S. remained robust at $10.6 billion, down from a record high of $13.7 billion in January.
Exports to countries other than the U.S. saw an even steeper decline, falling 12.4% in February, largely due to lower exports of unwrought gold to the U.K. and various products to Germany. In contrast, Canadian exports to South Korea saw a modest increase.
Imports from countries other than the U.S. fell by 2.0%, resulting in a widening trade deficit with non-U.S. countries, which reached a record $12.1 billion in February.
Canada’s trade in services also showed a decline in February, with exports falling by 1.6% to $17.7 billion, while imports of services decreased by 0.8% to $18.3 billion. This shift contributed to a larger overall trade deficit when services are included in the equation, as total exports of goods and services fell 4.8%, while total imports grew by 0.4%.