Synopsis:
CIBC reports that Canada’s trade deficit widened sharply to a record CAD 7.1bn in April, driven by a steep 11% drop in exports amid rising US tariffs. The data signals a deteriorating trade environment with the US, dragging down monthly GDP and reinforcing expectations for a BoC rate cut in July.
Key Points:
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Record trade deficit: April’s trade gap hit CAD 7.1bn, the largest on record, as exports fell 11% m/m (9% in volume terms), primarily due to a 16% drop in shipments to the US.
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Tariff impact: US tariffs on autos, food, and pharmaceuticals triggered a halt in Canadian production and exports, with autos and parts down 17%, and consumer food exports to the US down 16%.
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Energy and machinery: Energy exports fell 8% due to lower prices and pipeline disruptions, while industrial machinery and forest products also declined.
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Imports fell too: Overall imports dropped 3.5%, but imports from countries outside the US hit a record high, rising 8%, while US imports dropped 11%.
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Services trade weakened: Both service exports (-0.5%) and imports (-1.1%) fell, notably in travel services, as cross-border tourism declined.
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Currency factor: A stronger Canadian dollar in April (amid broad USD weakness) exacerbated the CAD-denominated trade imbalance, as exports are invoiced in USD.
Conclusion:
April’s record trade deficit underscores the economic toll of escalating US tariffs on Canada’s export-driven sectors, particularly autos and food. With a flat GDP print now likely for April, CIBC reaffirms its expectation for a BoC rate cut in July, as the fallout from trade tensions and weak cross-border activity deepen.
