Canada's trade balance returned to surplus in March, driven primarily by a surge in oil prices and a significant increase in gold exports, according to Royal Bank of Canada (RBC) economist Nathan Janzen [1]. While energy exports provided a boost, non-energy exports continued to face challenges, particularly from U.S. tariffs. Steel and lumber exports, which are heavily tariffed, saw volumes decline by 50% and 22% respectively compared to the previous year [1].
Despite these headwinds, there were positive signs in other sectors. Motor vehicle exports showed improvement, and imports of industrial equipment rose by an annualized rate of 17% in Q1, indicating firmer domestic demand and increased business investment [1]. However, when excluding price impacts, overall exports declined by an annualized 2.4% in Q1, reflecting ongoing external pressures [1].
The surge in Q1 imports is expected to subtract a large 4 percentage points from Q1 GDP growth, but this is partially offset by resilient domestic demand [1]. Looking ahead, significant trade uncertainty remains, particularly with upcoming negotiations on the renewal of the Canada-United States-Mexico Agreement (CUSMA). RBC expects that a more stable U.S. tariff environment in 2026, though still at higher rates for some products, will reduce trade-related headwinds compared to 2025 [1].
CONCLUSION
Canada's trade surplus in March was primarily driven by strong energy exports, offsetting ongoing tariff-related weaknesses in other sectors. While trade uncertainty persists, especially regarding CUSMA negotiations, resilient domestic demand and business investment provide some support to the economic outlook.