Canada removed some retaliatory tariffs to ease tensions; key U.S. duties on steel, aluminum, autos, and copper remain in place.
Canada’s external accounts swung to a new low in the second quarter as sales to the United States shrank during the trade fight, pushing the country’s current account shortfall to a record.
Statistics Canada said Thursday the deficit widened to C$21.16 billion ($15.4 billion) in the April-June period. That is the biggest gap since at least the early 1980s and far larger than the C$1.32 billion hole in the first quarter, when many U.S. buyers stocked up ahead of tariffs.
Economists in a Bloomberg survey expected a C$19.3 billion deficit. The result shows that U.S. President Donald Trump’s tariffs have disrupted trade in goods between Canada and the U.S.
Goods exports fell back to 2021 levels and dropped 13.1% in the quarter, the agency reported. The goods trade deficit hit a record C$19.6 billion. This was mostly due to lower shipments to the U.S., Canada’s largest market. Shipments to that market fell sharply during the quarter.
The current account tracks trade in goods and services plus income and investment flows with the rest of the world. Strong surpluses can lift a currency, while persistent deficits often weigh on it.
“Not a great showing for Canada, but it was clearly an exceptional quarter,” said Benjamin Reitzes, rates and macro strategist at Bank of Montreal. “Those flows need to turn positive or the Canadian dollar could be in for a rough ride.”
By 10:03 a.m. in Ottawa, the Canadian dollar traded around C$1.377 per U.S. dollar and was roughly 4.5% stronger on the year.
U.S. GDP rises, Canadian economy slows
A revised release from the Bureau of Economic Analysis on Thursday put U.S. real GDP growth at a 3.3% annualized pace.
Soft export performance likely left Canada’s economy flat in the second quarter. Bloomberg’s economist poll points to GDP contracting at an annualized -0.7% pace for that period. Statistics Canada will publish expenditure- and income-based GDP figures on Friday.
Trade Minister Dominic LeBlanc said Wednesday, after leaving Washington, that talks had advanced following his meeting with U.S. Commerce Secretary Howard Lutnick.
His office said the two met for about 90 minutes on Tuesday in a constructive session that covered concrete proposals already on the table.
Further technical talks will now be handled by Canada’s ambassador to the U.S., Kirsten Hillman, who also serves as chief negotiator, and United States Trade Representative Jamieson Greer. Officials said those talks focus on detailed proposals already circulating between the two sides.
Canada eased tariffs to reopen dialogue
This week’s movement follows Prime Minister Mark Carney’s decision to remove some of Canada’s retaliatory measures, as reported by Cryptopolitan, to step up negotiations aimed at easing pressure from President Trump’s duties on key Canadian industries.
Tariffs remain in place on steel, aluminum, autos, and copper for Canada. LeBlanc has said the country’s counter-tariffs were a major sticking point for the Trump administration as both sides work on a new economic and security arrangement.
Following Trump’s March move to levy broad duties, Canada responded with 25% tariffs on a wide list of U.S. goods, including oranges, alcohol, and motorcycles.
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