Canada's trade deficit widened significantly to $5.7 billion in February, marking the largest shortfall since August, as imports soared to a record high primarily due to increased gold acquisitions. The federal agency Statistics Canada reported these figures on Thursday, revealing a deeper deficit than economists had anticipated.
Record Imports Driven by Gold Purchases
The country's trade activity experienced a notable surge, with imports growing by 8.4 percent and exports increasing by 6.4 percent. In volume terms, total imports rose 7.1 percent while total exports increased 4.8 percent. A key driver of this import spike was the category of metal and non-metallic minerals, which saw a dramatic 45.6 percent increase in February, largely attributed to higher purchases of gold in the United States.
US Trade Dynamics Shift
Overall imports from the United States surged by 13.6 percent, reaching the highest level since March 2025 when tariffs first came into effect. This increase was propelled by higher gold and automotive imports. In contrast, exports to the US increased to a lesser extent, rising by 4.4 percent on higher shipments of passenger cars and light trucks.
As a result, Canada's trade surplus with the United States narrowed considerably to $1.7 billion from $4.9 billion in January, marking the smallest surplus since May 2020. This shift underscores the impact of recent trade policies and market dynamics on bilateral economic relations.
Broader Trade Patterns and Revisions
Statistics Canada also revised its January trade data, indicating a larger trade deficit of $4.2 billion for that month. Economists surveyed by Bloomberg had expected a February trade shortfall of $2.5 billion, making the actual $5.7 billion deficit deeper than any estimate and ranking among the largest on record. Notably, excluding precious metals, the deficit would have been even more substantial at $10.3 billion.
Impact on Economic Outlook
Andrew Grantham, senior economist at Canadian Imperial Bank of Commerce, commented on the implications for economic growth. "While net trade will likely be a negative for Q1 GDP due to the surge in imports, that's also likely a sign of restocking following the inventory drawdown that was a large drag on GDP in the previous quarter," he stated in a report to investors.
The February data provides a snapshot of Canada's trade activity ahead of global events such as the Iran war, with the impact of the global oil price shock and a sharp decline in gold prices expected to appear in the March report. This timing highlights the volatility and interconnectedness of international markets.
Other Key Trade Developments
In addition to US trade, Canada's trade with countries other than the United States reached a record high in February, with gold playing a significant role in that increase as well. Exports to those countries increased by 10.5 percent while imports rose by 1.6 percent. Consequently, Canada's trade deficit with countries other than the US narrowed to $7.5 billion, down from $9.1 billion in January.
Other notable trends include:
- Imports of waste and scrap metal rose by 108 percent, more than doubling due to higher imports of waste and scrap of gold from the US.
- Exports of motor vehicles and parts increased by 24.2 percent in February, rebounding after work stoppages held back auto production in January.
These figures collectively paint a complex picture of Canada's trade landscape, where precious metals like gold are exerting a disproportionate influence on import volumes and deficit calculations. As global economic conditions evolve, monitoring these trends will be crucial for policymakers and investors alike.
