Toronto: Canada’s trade deficit ballooned to $19.5 billion in the second quarter, as U.S. tariffs hit exports and a stronger loonie squeezed competitiveness, according to new figures from Statistics Canada. The deficit marks a sharp rise from $800 million in the previous quarter.
Exports fell significantly, largely due to U.S. trade measures targeting Canadian goods. Meanwhile, the Canadian dollar strengthened against its U.S. counterpart, narrowing the gap further. Canada’s goods surplus with the United States — once a sticking point for President Donald Trump — shrank from $31.3 billion in Q1 to just $10.1 billion.
Economist Moshe Lander of Concordia University said the widening gap was expected. “In the middle of a trade war with the U.S., it’s no surprise we’re exporting less to our largest partner,” he explained. He noted that Canada remains a major export economy, with annual shipments worth half a trillion dollars, but imports are rising to match.
The impact could ripple through the labor market. With fewer exports, manufacturers may need fewer workers, raising the risk of job losses.
Canada’s exports beyond the U.S. also declined, slipping from $31.8 billion to $29.6 billion. Prime Minister Mark Carney has tried to offset U.S. tensions by deepening ties elsewhere. In Berlin this week, he joined German Chancellor Friedrich Merz to promote Canadian metals, minerals, and energy in Europe.
Analysts say Canada waited too long to diversify. “Once Canada secured U.S. free trade, it stopped trying to make new friends,” Lander said. “When the tariff threats came, nobody in Europe defended us.”
Carney has insisted that Canada still holds the “best trade deal” with Washington under the current U.S.-Mexico-Canada Agreement (USMCA). But that pact comes up for review next year, and experts warn Ottawa may lack leverage to protect past gains.
“Carney knows he’s the smartest person in the room,” Lander added. “The question is whether those skills can secure the best possible settlement for Canada — even if it falls short of what we had under free trade before Trump’s tariffs.”
