Gold props up exports while tariffs and weak US demand widen Canada’s 2025 trade deficit
Canada just posted its biggest non‑pandemic trade deficit on record – and the numbers only look tolerable because gold is doing so much heavy lifting.
Canada’s trade deficit widened to $31.3bn in 2025, the largest annual shortfall outside 2020 in data going back to 1988, according to Bloomberg.
Annual exports slipped 0.2 percent as most product sections declined, but that headline masks deeper weakness.
Exports of unwrought gold, silver, platinum‑group metals and their alloys surged 41.7 percent last year; excluding that category, overall exports fell 3 percent.
At the same time, Canada is leaning away from the United States.
The proportion of goods exports going to the US fell to 71.7 percent in 2025 from 75.9 percent a year earlier, while the US share of imports dropped to 58.8 percent from 62.3 percent.
Exports to the US declined 5.8 percent and imports fell 2.9 percent, narrowing Canada’s trade surplus with its southern neighbour to $81.6bn in 2025 from $101.3bn in 2024.
Non‑US markets are taking on a larger role.
Exports to countries excluding the US rose 17.2 percent in 2025 and imports from those markets increased 12.4 percent.
Reuters said the share of exports to the US on a full‑year basis dropped to 72 percent in 2025 from 76 percent a year earlier.
Stuart Bergman, chief economist at Export Development Canada, said this is “more likely an indication of a trend than a single‑month movement,” pointing to a 17 percent surge in exports to countries other than the US in 2025 and noting that some manufacturing exports also grew.
Canada’s trade deficit with non‑US countries still widened to $112.9bn from $108.4bn, Bloomberg reported.
Tariffs sit at the centre of this shift.
US President Donald Trump’s tariffs have “upended” Canada’s trading relationship with the US, “wreaking havoc on exporters” and pushing some to find alternative destinations.
Reuters said exports edged down 0.2 percent in 2025, weighed by reduced exports to the US after it began a trade war.
Karl Schamotta, chief market strategist at Corpay, said “Canada has thus far escaped the worst of the trade blow,” but warned that officials on both sides of the border are preparing for “acrimonious negotiations in the months ahead” and that currency hedgers should do the same.
The United States‑Mexico‑Canada Agreement, which has shielded much of Canada’s exports from US tariffs, is set for review by a July 1 deadline.
The latest monthly data offer a softer landing than the annual picture.
Canada’s trade deficit narrowed to $1.31bn in December from a revised $2.59bn in November, beating economists’ expectations for about a $2bn gap.
Total exports rose 2.6 percent to $65.63bn, driven primarily by unwrought gold and higher gold prices, Reuters said.
Bloomberg reported that, excluding the product group that includes unwrought gold, the trade deficit would have been $7.1bn in December.
In that month, 67.4 percent of Canadian exports went to the US, the lowest share on record outside the pandemic.
Market reaction has been measured.
Reuters said the Canadian dollar steadied around $1.37 per US$1 (about 73 US cents) after six straight days of declines as traders digested the narrower December deficit and a 1.9 percent rise in oil prices to US$66.43 a barrel.
Two‑year Government of Canada bond yields were up 0.3 basis points at 2.354 percent, while 10‑year yields slipped less than half a basis point to 3.226 percent after touching a near seven‑week low earlier in the week.
