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Canada's trade deficit soared to $5.9 billion in June - outpacing expectations - after an unusual jump in industrial machinery imports tipped the scales and capped a record-breaking second quarter for the trade gap.
What does this mean?
This marks the biggest monthly trade gap Canada has seen in 2025, even surpassing the $5.8 billion economists expected. Imports rose 1.4%, mostly because of a single, high-value machinery delivery, interrupting a four-month stretch of declines. Without that one-off, imports actually would have dropped by nearly 2%. Exports nudged up 0.9%, but that wasn't enough to counter rising imports. Digging deeper, the second quarter's real exports sank 9%, while real imports dipped only 1.5% - a sign that Canada's trade challenges aren't going anywhere. Still, there's a silver lining with the US: exports to America jumped 3.1%, widening the surplus there to $3.9 billion, even as deficits with other countries ballooned to $9.8 billion. On a quarterly basis, Canada racked up a record $19 billion deficit - a huge leap from less than half a billion last quarter.
This record deficit highlights just how much Canadian exporters are struggling to keep up with import demand, casting doubt on the strength of the country's manufacturing and resource sectors. If real exports continue to stumble, the Canadian dollar could take a hit and investors may need to lower their expectations for economic growth.
The bigger picture: Global headwinds meet local realities.
Canada's growing trade gap is a reminder of the tough spot that mid-sized economies face amid global uncertainty. As demand cools off worldwide and big-ticket imports create volatility, policymakers might need to double down on diversifying exports and supporting local industry. Without improvement, there could be ripple effects for jobs, government spending, and North American trade at large.