{"id":7331,"date":"2026-02-19T16:25:00","date_gmt":"2026-02-19T16:25:00","guid":{"rendered":"https:\/\/www.rbc.com\/en\/economics\/?p=7331"},"modified":"2026-04-03T00:02:15","modified_gmt":"2026-04-03T00:02:15","slug":"canadas-trade-deficit-narrowed-in-december-to-cap-volatile-2025","status":"publish","type":"post","link":"https:\/\/www.rbc.com\/en\/economics\/canadian-analysis\/data-flashes\/canadas-trade-deficit-narrowed-in-december-to-cap-volatile-2025\/","title":{"rendered":"Canada&#8217;s trade deficit\u00a0narrowed in December to cap volatile 2025"},"content":{"rendered":"\n<section class=\"wp-block-rbc-section-block  pos-rel\" style=\"border-radius:0px\">\n<div class=\"wp-block-rbc-section-inner-block  section-inner\" style=\"border-radius:0x\">\n<h4 class=\"wp-block-heading has-rbc-bright-blue-color has-text-color has-link-color wp-elements-424e360956f0fcfee5d985cb6e2299b5\" id=\"h-the-bottom-line\">The Bottom Line:<\/h4>\n\n\n\n<p>The Canadian trade deficit narrowed in December to cap a year in which Canada&#8217;s trade flows were heavily impacted by U.S. tariffs but still by less than feared earlier in the year when tariff threats were at their most extreme.&nbsp;<\/p>\n\n\n\n<p>Most Canadian exports (almost 90%) remained duty free last year thanks to the exemption from tariffs for products compliant with the CUSMA free trade agreement, but exports of products specifically targeted by tariffs (steel and aluminum, forestry, and motor vehicle products) fell sharply and overall export volumes (excluding price impacts) were still down 2% despite some offset from increased shipments to other parts of the world.&nbsp;<\/p>\n\n\n\n<p>Significant trade&nbsp; uncertainty remains with negotiations on CUSMA renewal set to kick off in coming months, but we continue to expect, as a base-case, that a more stable&nbsp; international trade backdrop in 2026 (albeit still at significantly higher tariff rates) will leave trade as less of a headwind to growth than it was in 2025. U.S. tariff rates have edged slightly lower in recent months, and the average rate imposed on imports from Canada remains relatively low.<\/p>\n\n\n\n<p>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&nbsp; (and per-worker) economic conditions in the year ahead.&nbsp;<\/p>\n\n\n\n<hr class=\"wp-block-separator has-alpha-channel-opacity is-style-wide wide\" \/>\n\n\n\n<div id=\"everviz-IaGHzHJ48\" class=\"everviz-IaGHzHJ48\" data-view=\"graph\"><\/div>\n\n\n\n<hr class=\"wp-block-separator has-alpha-channel-opacity is-style-wide wide\" \/>\n\n\n\n<h4 class=\"wp-block-heading has-rbc-bright-blue-color has-text-color has-link-color wp-elements-7a9b53735b758580488902cab99ee6fa\" id=\"h-the-january-details\">The January details:<\/h4>\n\n\n\n<ul class=\"wp-block-rbc-list is-style-chevron-list\">\n<li class=\"wp-block-rbc-list-item\">\n<p>The Canadian merchandise trade deficit narrowed to -$1.3 billion in December from-$2.6 billion in November, capping off a volatile year in 2025.<\/p>\n<\/li>\n\n\n\n<li class=\"wp-block-rbc-list-item\">\n<p>Details\u00a0 behind the monthly improvement\u00a0 in the deficit in December were mixed. The 2.6%\u00a0 export gain was\u00a0 largely concentrated in gold\u00a0 and aircraft exports with broadly lower exports of other products. But a jump in equipment imports is a positive near-term sign\u00a0 for business investment, and overall net trade is tracking a percentage point add to Q4 GDP growth to build on a 3 ppt add in Q3.\u00a0<\/p>\n<\/li>\n\n\n\n<li class=\"wp-block-rbc-list-item\">\n<p>But international trade data is volatile at the best of times, and more-so in the year past due to tariffs and trade disruptions\u00a0 with a large U.S. imported inventory build boosted Canadian (and other countries selling to the U.S.) exports in late 2024 and early 2025 followed by a large decline after tariffs were imposed beginning\u00a0 in March last year.<\/p>\n<\/li>\n\n\n\n<li class=\"wp-block-rbc-list-item\">\n<p>On balance, Canadian\u00a0 merchandise exports\u00a0 for 2025 in total came in 0.2% below 2024 levels. Excluding price impacts (including a large rise in gold\/metal prices and decline in energy prices,), export volumes declined 2% in 2025 from 2024.\u00a0<\/p>\n<\/li>\n\n\n\n<li class=\"wp-block-rbc-list-item\">\n<p>Despite a relatively low U.S. tariff rate (on average) on imports from Canada\u00a0 &#8212;\u00a0 89% of\u00a0 products continued to cross the\u00a0 border duty free in December &#8212; products specifically targeted by tariffs saw steep declines<\/p>\n<\/li>\n\n\n\n<li class=\"wp-block-rbc-list-item\">\n<p>Steel product exports declined by 24% on the year and forestry product exports fell 8%.\u00a0 Aluminum export volumes declined by 15% although a sharp rise in aluminum prices left a smaller 7% drop in nominal terms.\u00a0 Motor vehicle exports were little changed\u00a0 in 2025 excluding price impacts.<\/p>\n<\/li>\n\n\n\n<li class=\"wp-block-rbc-list-item\">\n<p>Most Canadian exports still go to the United States, but the share fell to 71% on average in 2025 (and 67% as of Q4) from 75% in 2024. The share of imports from the U.S. also declined, to 59% in 2025 (and 58% as of Q4) from 62% in 2024. The increased share of exports going to non-U.S. destinations was concentrated in a large rise in the value of gold shipments to the U.K.<\/p>\n<\/li>\n\n\n\n<li class=\"wp-block-rbc-list-item\">\n<p>Canada&#8217;s share of the U.S. import market declined from 12.6% in 2024 to 11.2% in 2025 &#8212; the second largest decline among major U.S. trade partners next to China&#8217;s drop from 13.4% to 9%.\u00a0 Part of that decline was tied to a surge in U.S. gold\u00a0 imports (largely not\u00a0 coming from Canada)\u00a0 and a drop in energy prices&#8211; excluding those products, Canada&#8217;s share declined to 9.1% from 10% in\u00a0 2024.\u00a0<\/p>\n<\/li>\n\n\n\n<li class=\"wp-block-rbc-list-item\">\n<p>U.S. reported tariff revenues remain high but continued to edge lower in December, including those collected from Canada. \u00a0The average effective U.S. tariff rate calculated by the U.S. Census Bureau (reported separately this morning) edged down to 9.3% from 9.8% in November and a recent peak of 11% in October. \u00a0The effective tariff rate on imports from Canada remained the lowest among U.S. major trading partners, declining to 3.1% from 3.7% in November.\u00a0 89% of U.S. imports from Canada\u00a0 crossed the border\u00a0 duty free in December, slightly above the 87% average per-month in 2025 as a whole.<\/p>\n<\/li>\n\n\n\n<li class=\"wp-block-rbc-list-item\">\n<p>Despite significant tariffs, the U.S. trade deficit widened slightly to $1.24 trillion in 2025 \u00a0from $1.22 trillion in 2024.<\/p>\n<\/li>\n\n\n\n<li class=\"wp-block-rbc-list-item\">\n<p>Canada was still the top source of imports for 22 U.S. states in 2025, unchanged from 2024.\u00a0<\/p>\n<\/li>\n<\/ul>\n\n\n\n<figure data-wp-context=\"{&quot;imageId&quot;:&quot;69d0aa9a24fcb&quot;}\" data-wp-interactive=\"core\/image\" data-wp-key=\"69d0aa9a24fcb\" class=\"wp-block-image size-full wp-lightbox-container\"><img loading=\"lazy\" decoding=\"async\" width=\"7954\" height=\"11032\" data-wp-class--hide=\"state.isContentHidden\" data-wp-class--show=\"state.isContentVisible\" data-wp-init=\"callbacks.setButtonStyles\" data-wp-on--click=\"actions.showLightbox\" data-wp-on--load=\"callbacks.setButtonStyles\" data-wp-on-window--resize=\"callbacks.setButtonStyles\" src=\"https:\/\/www.rbc.com\/en\/economics\/wp-content\/uploads\/sites\/23\/2026\/02\/Trade-19-Feb-2026.png\" alt=\"RBC Economics - Canada Merchandise Trade Summary \" class=\"wp-image-7333\" srcset=\"https:\/\/www.rbc.com\/en\/economics\/wp-content\/uploads\/sites\/23\/2026\/02\/Trade-19-Feb-2026.png 7954w, https:\/\/www.rbc.com\/en\/economics\/wp-content\/uploads\/sites\/23\/2026\/02\/Trade-19-Feb-2026.png?resize=216,300 216w, https:\/\/www.rbc.com\/en\/economics\/wp-content\/uploads\/sites\/23\/2026\/02\/Trade-19-Feb-2026.png?resize=768,1065 768w, https:\/\/www.rbc.com\/en\/economics\/wp-content\/uploads\/sites\/23\/2026\/02\/Trade-19-Feb-2026.png?resize=738,1024 738w, https:\/\/www.rbc.com\/en\/economics\/wp-content\/uploads\/sites\/23\/2026\/02\/Trade-19-Feb-2026.png?resize=1107,1536 1107w, https:\/\/www.rbc.com\/en\/economics\/wp-content\/uploads\/sites\/23\/2026\/02\/Trade-19-Feb-2026.png?resize=1477,2048 1477w\" sizes=\"auto, (max-width: 7954px) 100vw, 7954px\" \/><button\n\t\t\tclass=\"lightbox-trigger\"\n\t\t\ttype=\"button\"\n\t\t\taria-haspopup=\"dialog\"\n\t\t\taria-label=\"Enlarge\"\n\t\t\tdata-wp-init=\"callbacks.initTriggerButton\"\n\t\t\tdata-wp-on--click=\"actions.showLightbox\"\n\t\t\tdata-wp-style--right=\"state.imageButtonRight\"\n\t\t\tdata-wp-style--top=\"state.imageButtonTop\"\n\t\t>\n\t\t\t<svg xmlns=\"http:\/\/www.w3.org\/2000\/svg\" width=\"12\" height=\"12\" fill=\"none\" viewBox=\"0 0 12 12\">\n\t\t\t\t<path fill=\"#fff\" d=\"M2 0a2 2 0 0 0-2 2v2h1.5V2a.5.5 0 0 1 .5-.5h2V0H2Zm2 10.5H2a.5.5 0 0 1-.5-.5V8H0v2a2 2 0 0 0 2 2h2v-1.5ZM8 12v-1.5h2a.5.5 0 0 0 .5-.5V8H12v2a2 2 0 0 1-2 2H8Zm2-12a2 2 0 0 1 2 2v2h-1.5V2a.5.5 0 0 0-.5-.5H8V0h2Z\" \/>\n\t\t\t<\/svg>\n\t\t<\/button><figcaption class=\"wp-element-caption\">RBC Economics &#8211; Canada Merchandise Trade Summary <\/figcaption><\/figure>\n\n\n\n<hr class=\"wp-block-separator has-alpha-channel-opacity is-style-wide wide\" \/>\n\n\n\n<p class=\"has-text-align-center\"><strong>About the Author<\/strong><\/p>\n\n\n\n<p class=\"has-text-align-left\"><em><em><br><strong>Nathan Janzen<\/strong><em>\u00a0is an Assistant Chief Economist, leading the macroeconomic analysis group. His focus is on analysis and forecasting macroeconomic developments in Canada and the United States.<\/em><\/em><\/em><\/p>\n\n\n\n<hr class=\"wp-block-separator has-alpha-channel-opacity is-style-wide wide\" \/>\n<\/div>\n<\/section>\n","protected":false},"excerpt":{"rendered":"","protected":false},"author":318,"featured_media":6867,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"advgb_blocks_editor_width":"","advgb_blocks_columns_visual_guide":"","footnotes":""},"categories":[83,93],"tags":[115,119,24],"class_list":["post-7331","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-canadian-analysis","category-data-flashes","tag-canada","tag-cusma","tag-trade"],"acf":[],"yoast_head":"<!-- This site is optimized with the Yoast SEO Premium plugin v26.7 (Yoast SEO v26.8) - https:\/\/yoast.com\/product\/yoast-seo-premium-wordpress\/ -->\n<title>Canada&#039;s trade 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