Canada's merchandise trade surplus widened to $4.2 billion in May, up from $3.4 billion in April, according to economists at the Royal Bank of Canada (RBC) [1]. This increase was driven by a 0.9% rise in exports and a 0.2% decline in imports during the month [1]. The April surplus was also revised upward from a previously reported $2.7 billion [1].
Despite the headline growth, export volumes excluding price effects actually fell by 0.5% in May, indicating that the underlying foreign demand softened even as overall export values increased [1]. However, export volumes are still on track for a significant increase in the second quarter as a whole [1]. On the import side, industrial machinery and equipment imports surged by 6.1% from April and were up 12.8% year-over-year, signaling that business investment is rising as Canadian firms adapt to an uncertain trade environment [1].
RBC economists noted that monthly trade data can be heavily influenced by commodity prices and individual product categories, suggesting the importance of looking beyond headline figures to assess underlying trends [1]. They also highlighted that trade flows continue to be shaped by uncertainty around U.S. trade policy [1]. Looking ahead, RBC expects that trade will become less of a drag on Canadian economic growth in 2025 as the international environment gradually stabilizes [1].
CONCLUSION
Canada's trade surplus expanded in May, supported by higher exports and increased business investment, despite some softness in underlying export volumes. RBC economists anticipate that trade will have a less negative impact on Canadian growth in 2025 as global conditions improve. Market sentiment appears cautiously positive, with medium impact expected.