Key Takeaways
- Canada recorded a merchandise trade surplus of CAD 4.24 billion in May, up 0.9 % from April and marking the fourth straight month of growth.
- Exports to the United States rose 1.5 % to CAD 53.72 billion, pushing the U.S. share of total exports to nearly 70 %, while U.S. imports fell 1.4 %.
- The bilateral surplus with the U.S. widened to CAD 11.6 billion, the highest since January 2025, driven largely by higher energy prices.
- Trade with non‑U.S. partners deteriorated, expanding the deficit to CAD 7.4 billion as exports elsewhere slipped and imports rose.
- Growth in exports was powered by metal ores and non‑metallic minerals (+16.1 %), especially sulfur shipments affected by Middle‑East tensions, alongside gains in consumer goods, industrial chemicals, and agri‑food products.
- Crude oil and gold exports declined, trimming energy exports by 2 % despite a prior surge, highlighting the volatility of commodity‑driven surpluses.
- Total imports edged down 0.2 %, chiefly due to an 18.2 % drop in metal and non‑metallic imports.
- Analysts had expected a smaller surplus (CAD 2.85 billion); BMO economist Robert Kavcic cautions that the current high may be a “watermark” subject to oil‑price swings, though net exports should bolster Q2 growth.
- Ongoing efforts to diversify away from the U.S. face structural hurdles, and the U.S. decision not to extend CUSMA beyond 2036 adds uncertainty to long‑term trade planning.
Overview of Canada’s May Trade Surplus
Canada’s merchandise trade surplus reached CAD 4.24 billion in May, a modest 0.9 % increase from the revised CAD 3.41 billion surplus posted in April. This marks the fourth consecutive month of surplus growth and the third month in a row that Canada has posted a positive trade balance. The figure surpassed the‑monthly balance, according to Statistics Canada, reflects strengthening export momentum, particularly to the United States, and a slight contraction in imports. The result exceeded the median forecast of analysts polled by Reuters, who had anticipated a surplus of only CAD 2.85 billion, underscoring the robustness of Canada’s external trade performance during the period.
U.S.-Driven Export Growth and Import Decline
Exports to the United States climbed 1.5 % to CAD 53.72 billion, extending a streak of four straight monthly gains. Consequently, nearly 70 % of Canada’s total exports were destined for its southern neighbour in May, the highest share observed in recent months. On the import side, purchases from the United States slipped 1.4 %, contributing to a widening of the bilateral trade gap. The divergent trends—rising U.S.-bound exports coupled with falling U.S. imports—were the primary engine behind the expansion of Canada’s overall trade surplus, highlighting the continued dominance of the U.S. market in Canada’s trade equation despite ongoing diversification efforts.
Bilateral Surplus with the United States and Growing Non‑U.S. Deficit
The surplus with the United States swelled to CAD 11.6 billion in May, up from CAD 10.3 billion in April, representing the largest U.S.‑Canada trade surplus since the record high observed in January 2025. Statistics Canada attributed part of this increase to higher prices for energy exports, which boosted the value of shipments even as volumes fluctuated. Conversely, trade with countries outside the United States deteriorated: exports to non‑U.S. markets continued to shrink (though at a slower pace than in April), while imports from those regions rose. This dynamic pushed Canada’s trade deficit with the rest of the world to CAD 7.4 billion in May, illustrating a bifurcated trade picture where gains with the U.S. are offset by worsening balances elsewhere.
Drivers of Export Growth: Metals, Minerals, and Diversified Goods
The month‑over‑month rise in total exports was chiefly powered by a 16.1 % surge in shipments of metal ores and non‑metallic minerals. Within this category, sulfur exports stood out, as disruptions in the Strait of Hormuz—stemming from the Middle‑East conflict—temporarily curtailed usual routing, prompting buyers to seek alternative sources and lift demand. Beyond minerals, broad‑based gains were recorded in consumer goods, industrial chemicals, and farm‑and‑fishing food products, each contributing to the overall export uptick. This diversification across commodity and manufactured goods helped cushion the impact of weaker performance in some traditional sectors, such as crude oil, and signaled a modest broadening of Canada’s export base.
Slip in Crude Oil and Gold Exports Offsets Some Gains
Despite the strong showing in metals and other goods, crude oil and gold exports posted declines. Energy exports fell by 2 % due to lower crude‑oil volumes, reversing a sharp 43.1 % increase recorded between February and April. The drop reflects both seasonal production adjustments and the lingering effects of geopolitical tensions that have intermittently disrupted oil flows. Gold exports also weakened, further trimming the contribution of precious metals to the trade surplus. These declines serve as a reminder that Canada’s trade balance remains sensitive to commodity price swings, even as non‑energy export categories gain traction.
Import Softening, Particularly in Metal and Non‑Metallic Categories
Total imports edged down 0.2 % in May, a slight contraction driven predominantly by an 18.2 % plunge in metal and non‑metallic imports. This sharp decrease offset modest rises in other import categories, resulting in an overall near‑flat import picture. The reduction in metal imports aligns with the observed strength in domestic metal‑ore exports, suggesting that Canadian manufacturers may be substituting foreign inputs with locally sourced materials or benefiting from favorable global metal prices. Meanwhile, other import segments—such as machinery, vehicles, and consumer goods—showed little change, keeping the aggregate import level relatively stable.
Market Expectations and Expert Outlook on the Surplus’s Durability
Analysts surveyed by Reuters had projected a considerably smaller surplus of CAD 2.85 billion, indicating that the actual outperformance caught many forecasters off guard. Senior BMO economist Robert Kavcic noted that while the current surplus provides a solid boost to net exports and could support Q2 growth, it is likely a “high watermark” for the near term. Kavcic warned that Canadian trade surpluses can fluctuate rapidly with oil‑price movements, implying that the present strength may not be sustained if energy prices retreat. Nonetheless, he acknowledged that the contribution of net exports to GDP remains positive, offering a counterweight to recent quarters of sluggish domestic demand.
Diversification Challenges and the Implications of the CUSMA Decision
Canada’s ongoing effort to lessen reliance on the United States faces structural obstacles, given that decades‑old supply chains are deeply entrenched in the world’s largest market. Trade experts caution that unwinding these linkages will take time, even as businesses actively seek alternative markets. Adding to the uncertainty, the United States announced it will not extend the Canada‑United States‑Mexico Agreement (CUSMA) beyond 2036 after a Canada‑Day meeting with Canadian and Mexican officials. Trade Minister Dominic LeBlanc characterized the decision as unsurprising, noting that the upcoming review of the agreement will shape future rules of origin, dispute‑settlement mechanisms, and market access. The combination of entrenched U.S. trade ties and the looming CUSMA deadline underscores the complexity of achieving meaningful diversification while maintaining robust bilateral trade flows.