Canada experienced a significantly larger merchandise trade deficit in February than anticipated, driven primarily by a sharp increase in gold imports. This surge pushed total imports to a record level, data released on Thursday.
The proportion of Canadian exports destined for the United States declined to just above 66%, down from 68% in January and well below the 79% recorded a year earlier when companies accelerated shipments ahead of impending U.S. tariffs. The trade deficit for February reached C$5.74 billion (US$4.12 billion), following an upward revision of January’s deficit to C$4.18 billion. Analysts had predicted a deficit of only C$2.25 billion, less than half the actual figure.
Total imports jumped 8.4% in February, reaching C$72.1 billion, the highest value ever recorded. In terms of volume, imports increased by 7.1%. This growth was largely fueled by a 45.6% rise in imports of metal and non-metallic mineral products, particularly gold purchased from the U.S. by Canadian entities. It is important to note that when ownership of a product transfers from a foreign party to a Canadian one, it is classified as an import on a balance-of-payments basis, even if the product does not physically cross the border. Physical entries are recorded on a customs basis.
Imports of motor vehicles and parts rose 5.9% as Canadian auto manufacturing resumed production and sales stabilized. Energy product imports also climbed 20.1% during the month.
On the export side, February saw a 6.4% increase, rebounding from a decline in January. Exports totaled C$66.31 billion, the highest since March 2025. Gold again played a significant role, with exports of unwrought gold, silver, platinum group metals, and their alloys increasing by 14.2%, driven by higher shipments of unwrought gold to the United Kingdom.
Due to the surge in gold imports from the U.S., Canada’s trade surplus with its southern neighbor narrowed sharply to C$1.7 billion in February from C$4.9 billion in January, marking the smallest surplus since May 2020. Meanwhile, exports to countries other than the U.S. rose 10.5% to reach a record C$22.3 billion, contributing to the historic low share of exports going to the United States.
Prince Owusu, senior economist at Export Development Canada, noted that Canada’s reliance on the U.S. market is decreasing as exports to other countries grow. He highlighted that while gold exports primarily drove this diversification, Prime Minister Mark Carney’s January agreement with China helped ease trade restrictions, boosting exports of canola, soybeans, and barley. Owusu expects a more pronounced increase in exports to China in the coming months.
Economists also anticipate growth in Canadian oil product exports due to rising crude oil prices influenced by the conflict in Iran.
Following the release of the trade data, the Canadian dollar slightly recovered but remained down 0.32% at C$1.3918 per U.S. dollar, or 71.85 U.S. cents. Meanwhile, yields on two-year government bonds increased by 3.8 basis points to 2.696%.
