CANADA DATA: April Trade Deficit Poses Downside Risks For Q2 GDP

Canada's international merchandise trade deficit printed a record C$7.14B, more than 4x larger than consensus (C$1.5B) and up from an upwardly revised C$2.3B prior (C$0.5B previously published). The overall goods and services balance saw the total trade deficit rise to C$7.5B from C$2.7B prior (services exports fell 0.5% with imports down 1.1%).

• Exports fell 10.8%, with imports down 3.5%. FX translation had an impact, with StatCan noting that the loonie rose 1.8 cents vs the USD in April, the largest monthly increase since May 2021 - so expressed in US dollars, Canadian exports fell 8.4% / imports 0.9%.
• The export total was the lowest since June 2023, for a 3rd monthly decline and the biggest % drop since the pandemic. Unsurprisingly, with tariff front-running reversing, a 15.7% fall in exports to the US was responsible for the decline, with ex-US exports rising 2.9%.
• In turn, motor vehicle and parts exports dropped 17.4%, following a pre-tariff export boom earlier in the year (had risen 21.0% between Nov 2024 and Mar 2025). Elsewhere, consumer goods exports fell 15.4% while energy exports declined 7.9%.
• Imports' fall was driven by motor vehicle/parts (17.7%), the flip side of the tariff war, with Canadian tariffs imposed on US products. There was a 48.8% jump in non-metallic mineral product imports, reflecting a near-tenfold rise in imports of precious metals.
• The 3M Goods and Services balance as a % of GDP was approximately -1.6%, hardly a record but on pace to subtract from growth in Q2 after contributing positively in Q1 on tariff front-running.
• The BOC noted with its decision this week that "the economy is expected to be considerably weaker in the second quarter, with the strength in exports and inventories reversing and final domestic demand remaining subdued", so the direction of travel should be no surprise - but the magnitude of the April deficit widening appears larger than expected.