Statistics Canada reported a trade deficit of $1.5 billion for the month, down sharply from a revised $3.1-billion surplus in January. The drop was driven by a 5.5% decrease in exports, which fell across 10 of 11 product categories, including autos, energy, metals and lumber. In volume terms, exports dropped 5.0%.
The retreat in exports follows a 15.9% surge between September and January that was fuelled by Canadian companies racing to get ahead of impending U.S. tariffs, notes CIBC economist Katherine Judge. That “front-running” effect reversed in February, with demand cooling across major markets.
“The tariff front-running boost to exports reversed sharply in February,” Judge wrote, noting the drop far exceeded market expectations for a $3.5-billion surplus. “U.S. businesses appear to have accumulated enough inventory in prior months, and exports will remain under pressure as a result.”
Energy and auto exports fall as imports continue to rise
Energy exports fell 6.3% in February, with declines across crude oil, natural gas, coal and diesel—particularly to the U.S. and Panama. Auto exports dropped 8.8%, including a 15.3% slide in passenger cars and light trucks after January’s two-decade high. Nearly all were shipped to the U.S.
Other notable declines included metals (-6.6%), forestry products (-10.8%) and pulp and paper (-13.0%). Aircraft exports were the exception, up 29.6% on stronger U.S. jet deliveries.
Imports rose 0.8% for the fifth straight month, led by motor vehicles (+5.8%), machinery (+3.1%) and energy (+5.2%). In volume terms, imports were flat. StatCan noted the figures include estimates due to delayed data tied to the CBSA’s new CARM system.
Trade with the U.S. narrows
Canada’s exports to the United States dropped 3.6%, or $2.1 billion, from January’s record high, while imports rose 2.5%. That pushed Canada’s trade surplus with the U.S. down to $10.6 billion from $13.7 billion a month earlier.
Exports to countries other than the U.S. fell even more sharply, dropping 12.4%, with notable declines to the United Kingdom (unwrought gold) and Germany. Imports from non-U.S. countries were down 2.0%, but Canada’s trade deficit with these partners widened to a record $12.1 billion.
Outlook remains cautious
Despite Canada avoiding reciprocal tariffs on U.S. imports, Judge warned that previously announced U.S. tariffs on key Canadian sectors—such as autos, steel, and lumber—will continue to weigh on future export demand.
“Moreover, a higher effective tariff rate on U.S. imports as a whole will work to slow U.S. and global growth and will weigh on export demand for Canada ahead,” she added.
BMO’s Benjamin Reitzes also expects the impact of tariffs to intensify in March and April. Steel, aluminum and auto exports will be directly affected, while other sectors may accelerate efforts to meet USMCA rules to avoid penalties.
“Expect extremely volatile trade and other related data over the next few months as firms adjust/adapt to the tariff regime the U.S. has put in place,” he wrote.
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Last modified: April 3, 2025
