Canada’s trade deficit widened sharply in the second quarter, as U.S. tariffs and a stronger Canadian dollar weighed on exports, according to data released Thursday.
Statistics Canada said the shortfall in goods and services ballooned to $19.5 billion, compared with $800 million in the first quarter. The surplus with the United States, long a point of friction for President Donald Trump, narrowed from $31.3 billion to $10.1 billion.
Economist Moshe Lander of Concordia University said the figures reflect the direct impact of tariffs and a shrinking U.S. demand for Canadian products. “In the middle of a trade war, we’re exporting substantially less to our biggest partner. The widening deficit is not surprising,” he said.
Canada, an export-driven economy, still ships around $500 billion worth of goods annually. But reduced exports risk weakening manufacturing and triggering job losses, Lander warned.
Exports beyond the U.S. also fell, from $31.8 billion to $29.6 billion. Prime Minister Mark Carney has been pushing to expand Canada’s global footprint, most recently on a trip to Germany, where he joined Chancellor Friedrich Merz to promote Canadian energy, minerals and critical metals.
“Canada got complacent once it secured free trade with the U.S.,” Lander argued. “When tariff threats emerged, no European country rushed to our defence. That should have been a warning sign.”
Although Ottawa has touted its free trade deal with Washington as the “best trade deal” of any U.S. partner, the agreement comes up for review next year. Analysts warn Canada lacks leverage to avoid concessions.
“He’s got a large brain,” Lander said of Carney. “He knows he’s the smartest person in the room. The challenge will be negotiating the best deal possible, even if it’s weaker than what Canada enjoyed just months ago.”
