Canada posted its largest-ever merchandise trade deficit of 7.1 billion Canadian dollars (about $5.2 billion) in April 2025. This sharp shortfall was driven mainly by a steep drop in exports to the United States, Canada’s biggest trading partner, following the imposition of heavy tariffs by the Trump administration.
Exports to the US fell 15.7% in April, marking the third straight month of decline and a total drop of over 26% since January. The tariffs targeted autos and auto parts, with a 25% levy initially imposed in April, later suspended for auto parts but doubled to 50% for steel and aluminum in early June. These measures severely disrupted trade, especially in the auto sector, which has been balanced between the two countries for over 50 years.
The tariffs have forced Canadian auto manufacturers to halt or delay production. Stellantis temporarily closed a plant in Windsor, Ontario, and stopped a $1 billion upgrade at a Brampton factory. Honda paused an $11 billion electric vehicle project and moved some SUV production to the US. General Motors cut shifts at an Ontario truck plant.
Canada’s overall exports dropped 10.8% in April to their lowest level since June 2023. Motor vehicle and parts exports fell 17.4%, consumer goods by 15.4%, and energy products by 7.9%. Imports also declined by 3.5%, led by a 17.7% drop in motor vehicle imports and a 9.5% fall in industrial machinery imports.
Prime Minister Mark Carney described the trade war as a crisis and criticized the tariffs as “illogical” and “unjustified.” The trade deficit far exceeded economists’ predictions, which had forecast a $1.5 billion shortfall for April. Other factors contributing to the deficit included a stronger Canadian dollar and lower oil prices.
Canada’s trade deficit with countries other than the US also widened to $10.7 billion in April, despite a rise in exports to those countries. The total trade volume with the US had surpassed one trillion Canadian dollars for the third consecutive year in 2024, but the tariffs have now severely strained this relationship.
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