Data Flashes

The Bottom Line:

The surge in oil prices and another jump in gold exports were the main factors pushing Canada’s trade balance back into surplus in March.

Beyond those products, the data was mixed but broadly consistent with an external demand backdrop still under pressure from U.S. tariffs, but also still showing signs of stabilization. 

Excluding price impacts exports still declined by an annualized 2.4% in Q1 as a whole—exports of (heavily tariffed) steel and lumber products were still running 50% and 22%, respectively, below year ago levels.  But motor vehicle exports continued to recover from production disruptions earlier in the year. And overall export volumes (excluding price impacts) edged slightly above year-ago levels for the first time since March 2025. 

A surge in Q1 imports leaves net trade tracking a large 4 ppts from Q1 GDP growth, but also is consistent with offset from relatively resilient domestic demand, including a 17% (annualized rate) increase in industrial equipment and imports—a positive sign for Canadian business investment. 

Significant trade uncertainty remains with  negotiations on CUSMA renewal likely to intensify in coming months, but we continue to expect, as a base-case, that a more stable  U.S. tariff backdrop in 2026 (albeit still at significantly higher tariff rates for some products) will leave trade as less of a headwind to growth than it was in 2025.

The conflict in the Middle East is raising costs for households both in Canada and abroad, but the surge in net energy exports from higher oil prices is also significantly increasing revenues flowing into oil producing regions. Our base-case outlook for the economy expects that, coupled with the lagged impact of earlier Bank of Canada interest rate cuts and higher government spending plans will support further improvement in per-person (and per-worker) economic conditions in the year ahead. 

The details:

• The Canadian merchandise trade deficit swung sharply back to surplus in March (+1.8 billion from -$5.1 billion in February)—led largely by a surge in crude oil prices and another sharp increase in gold exports. 

• Crude oil exports jumped by 18.9% from February as prices surged due to the conflict in the Middle East. And the notoriously volatile unwrought gold and silver exports surged by 38%. 

• Excluding those components, the export gain was much smaller (+1.6%.) Still, 7 of 11 product sectors posted increases and export volumes were above year ago levels for the first time since March 2025.  

• Imports still posted a large increase in Q1 as a whole (+14% excluding price impacts) despite a 1.6% decline (-2.5% excluding price impacts) in March 

• That leaves net trade tracking a large 4 ppt subtraction from Q1 GDP growth, but higher imports also point to offsetting resilience in domestic demand.  The March trade data combined with early estimates for economy-wide production monthly are still tracking slight upside risk to our own forecast for a 1.3% Q1 GDP increase. 

• International trade flows likely continue to be influenced by the timing and threat of U.S. tariff actions—March was the first full month of a new tariff regime imposed by the U.S. administration after the U.S. Supreme Court ruled against IEEPA tariffs in February.

• That change had limited impact on Canada’s current trade backdrop with the United States, as Canadian exports meeting CUSMA criteria were already largely exempt from IEEPA tariffs. However, it had a larger impact on tariffs collected from other countries.

• Separately reported data this morning from the U.S. Census Bureau showed the average effective U.S. tariff rates on imports from Canada and Mexico little changed at 3.1% and 3.4%, respectively, in March but larger declines in rates on imports from some other countries. The rate on imports from China fell to 22% in March from 28.9% and from Vietnam to 7.1% from 12.1%.  The average calculated U.S. effective import tariff rate from all countries edged down to 6.8% from 8.4%. 

About the Author

Nathan Janzen is an Assistant Chief Economist, leading the macroeconomic analysis group. His focus is on analysis and forecasting macroeconomic developments in Canada and the United States.