Data Flashes

The Bottom Line:

Canada’s merchandise trade surplus widened to $2.7 billion in April from $1.8 billion in March, as exports rose 1.6% while imports edged up 0.3%, largely in line with our expectations.

Higher energy prices were a key driver. Oil prices climbed sharply from March levels, boosting energy exports, while motor vehicles and parts also increased, consistent with stronger vehicle production data following production disruptions earlier in the year.

Price swings muddy the picture, making volumes a better gauge of underlying foreign demand. Stripping out price impacts, volumes rose 0.2%, adding moderately to larger increases over the prior two months (which have also been revised upward).

Import trends will also be important to watch. Machinery and equipment purchases are a key indicator of business investment activity and can provide an early signal of how firms are responding to an uncertain trade environment. Imports of electronic machinery and equipment rose 3.2% in volume terms, more than offsetting the decline in industrial M&E (which were still up 5.7% from year-ago levels). This adds to evidence that business investment spending has started to edge higher despite elevated uncertainty.

Trade flows continue to be influenced by shifts in U.S. tariff policy and questions surrounding future arrangements. By our count, approximately 87% of Canadian exports to the United States crossed the border duty-free in April, leaving the effective U.S. tariff rate on Canadian goods well below those faced by many other trading partners.

Significant uncertainty remains, with negotiations on CUSMA renewal expected to intensify in coming months. Still, we continue to expect that a more stable international backdrop in 2026, albeit at higher tariff rates than before 2025, will make trade less of a headwind than it was over the past year.

The details:

• Exports rose 1.6% in nominal terms, supported by higher energy prices and stronger motor vehicle shipments. Energy exports increased another 9.7%, reflecting the rise in oil prices during the month, while motor vehicle and parts rose 5.9% as production continued to recover.

• Because price movements were a significant driver of headline flows in April, volumes provide a clearer signal of underlying demand conditions. Excluding price impacts, total exports rose 0.2%, mainly from motor vehicle and parts, with gains partially offset by weakness in metal and non-metallic mineral products.

• Imports were 0.3% higher from March (nominal). Excluding price effects, volumes fell 0.1%. Industrial machinery, equipment and parts were down 0.9% from March, but electronic and electrical equipment rose 3.2%, mainly due to increased processor imports from Ireland for data centres. That suggests continued resilience in business investment spending despite elevated uncertainty surrounding international trade policy.

• Canada’s goods trade surplus with the United States totaled $9.5 billion in April, compared with $7.8 billion in March. Exports to the U.S. rose 4.8% m/m (+24.2% y/y) while imports increased 1.6% (+9.9% y/y).

• Flows with countries outside the United States showed some moderation in April, with exports falling 4.8% (+25.7 y/y) and imports declining 1.5% (+4% y/y).

• Separately reported U.S. data showed the average effective tariff rate on imports from Canada little changed at approximately 3.2% in April, with roughly 87% of Canadian exports continuing to enter the U.S. duty-free under CUSMA exemptions and other provisions. The average effective U.S. tariff rate across all trading partners was 6.7%, compared with 6.8% in March.

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About the author:

Abbey Xu is an economist at RBC. She is a member of the macroeconomic analysis group, focusing on macroeconomic forecasting models and providing timely analysis and updates on economic trends.

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