Canada’s international merchandise trade deficit narrowed significantly in December as exports outpaced imports, according to data released by Statistics Canada on Thursday. The country posted a trade deficit of C$1.31 billion ($957 million) in December, down from a revised C$2.59 billion deficit in November. The improved trade balance came as metals and non-metallic mineral exports drove growth, though the nation’s reliance on United States markets continued to decline.
The December deficit was smaller than the C$2 billion shortfall economists had anticipated, according to the statistics agency. Total exports rose 2.6% to C$65.63 billion during the month, while imports increased at a slower pace of 0.6% to C$66.93 billion.
Metals and Gold Shipments Drive Export Growth
The improvement in Canada’s trade balance was primarily driven by a surge in metals and non-metallic mineral products, which grew 18% in December. Exports of unwrought gold led this category with a jump of over 37%, supported by higher prices in global markets. However, when excluding the metals and non-metallic category, Canadian exports edged down 0.2%, suggesting the overall export performance was heavily concentrated in specific sectors.
In volume terms, total exports were up 1.4%, Statistics Canada reported. Meanwhile, imports increased across six out of 11 product sections, driven primarily by gold, passenger vehicles, and energy products coming into the country.
Canada Trade Deficit with US Narrows Despite Declining Market Share
Exports to the United States, Canada’s largest trading partner, rose 1.1% in December, marking the first monthly increase in percentage terms in three months. However, this growth masked a concerning long-term trend for Canadian exporters. The share of Canadian exports destined for the United States fell to just over 67.4% of total exports in December, down sharply from 76.2% a year earlier.
According to Statistics Canada, this represented the lowest share of exports to the United States since data collection began, with the exception of two months during the COVID-19 pandemic in 2020. The share had been 68.4% in November and 67.5% in October, indicating a steady decline in recent months.
Additionally, imports from the United States rose faster at 3.5%, which narrowed Canada’s merchandise trade surplus with its southern neighbor to C$5.7 billion from C$6.5 billion in November. This bilateral trade relationship remains crucial for the Canadian economy despite the shifting export patterns.
Diversification Reaches Record Levels
In contrast to the declining US share, exports to countries other than the United States continued their upward momentum and reached an all-time high in December. Exports of gold to the United Kingdom led most of these gains, highlighting Canada’s growing trade diversification efforts.
Furthermore, imports from countries other than the United States fell 3% in December. As a result, Canada’s trade deficit with non-US countries narrowed to C$7 billion in December from C$9 billion in November, the statistics agency said.
The combination of reduced reliance on American markets and growing trade with other nations represents a significant shift in Canada’s international trade patterns. This diversification may provide the country with greater economic resilience, though the United States remains by far the dominant trading partner.
Future trade data will reveal whether December’s narrower trade deficit represents a sustainable trend or a temporary improvement driven primarily by gold price fluctuations. Economists will be monitoring upcoming monthly reports to assess whether Canada can maintain export growth while continuing to diversify its trading relationships beyond the United States.
