Canada's trade surplus surges to $4.2 billion as exporters race U.S. tariffs

OTTAWA · Canada's merchandise trade surplus widened substantially to $4.2 billion in August, as exporters rushed to increase shipments to the United States before new tariffs from the Trump administration took effect. The surplus was up from an upwardly revised $787 million in July and far exceeded analyst forecasts of $1.55 billion. Statistics Canada reported Tuesday that exports to the U.S. surged 8.1 per cent in August, while imports from the U.S. fell 2.5 per cent. This drove Canada's trade surplus with its largest trading partner to $11.2 billion, a 19-month high.

The agency suggested that threats of new U.S. tariffs might have fuelled a rush in orders from American businesses seeking to get ahead of higher duty payments. President Donald Trump's new tariffs, which cover roughly $20 billion of Canadian exports, came into effect on Aug. 22. They apply to a variety of products including wine, furniture, dairy products, cement, clothing, fishing rods and hockey equipment. Economists have said that September data will show a more accurate impact of the new tariffs and of Canadian counter-tariffs on U.S. imports, which came into effect on Sept. 8.

Katherine Judge, a senior economist at CIBC, said in a note that the spike in U.S. exports was thanks to firms front-running tariffs. "The increase is therefore probably temporary and will unwind come September," she said. Judge added that Canada's trade position is likely to deteriorate and exports will remain under pressure in the fourth quarter unless a trade deal with the U.S. is reached. The August surge lifted the share of Canadian exports going to the U.S. to almost 70 per cent, the first time that level has been reached since September 2025.

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Canada's overall exports increased by 2.5 per cent in August to $77.91 billion, rebounding from a 2.6 per cent decline in July. Exports of energy products, including refined petroleum and crude oil, posted the biggest gain, rising 4.7 per cent to $19.03 billion. Exports of refined petroleum energy products were up 17.4 per cent, driven by a rise in diesel exports to Peru, the United Kingdom, the U.S. and the Netherlands. Prince Owusu, a senior economist with Export Development Canada, said diesel exports might offset some of the impact of new tariffs in September. "My general assumption is that diesel exports might be able to offset some of the impact of new tariffs in September," said Owusu, adding that Canada has a unique opportunity to ship more refined products to the U.S. Excluding energy products, exports were up 1.8 per cent. Exports of consumer goods rose 6.6 per cent, industrial machinery, equipment and parts were up 10.1 per cent, and electronic and electrical equipment and parts increased 11.0 per cent. In volume terms, total exports rose 2.5 per cent.

Total imports fell by two per cent in August to $73.71 billion, the first decline since January. Imports of motor vehicles and parts posted the largest decline, falling 8.8 per cent. A stronger Canadian dollar also affected the value of exports. Canada's efforts to diversify its trade partners took a step back in August. After increasing 8.2 per cent in July, exports to countries other than the U.S. fell 8.5 per cent in August. The trade deficit with countries other than the U.S. widened to $7.0 billion in August from $5.3 billion in July. RBC assistant chief economist Nathan Janzen said in a note that ongoing exemptions for most exports under the USMCA trade agreement should keep economic damage contained. "We continue to expect the new tariffs imposed by the U.S. administration will have a significant impact on directly targeted sectors but with more than 80 per cent of Canadian exports to the U.S. still maintaining duty-free access under USMCA we expect limited spillover to the broader economy," he said. The Canadian dollar strengthened slightly after the trade data was released.

With files from BNN Bloomberg, CBC News and The Globe and Mail