Canada returns to trade surplus as oil surge and gold demand drive export boom

Canada’s merchandise trade balance swung back into surplus in March, helped by rising crude oil prices and strong global demand for gold, according to data released by Statistics Canada.

The country posted a surplus of C$1.78 billion ($1.31 billion), reversing a revised deficit of C$5.11 billion in February and marking its first surplus in six months. The figure also surprised markets, with analysts polled by Reuters expecting a deficit of C$2.88 billion.

The turnaround was driven by a sharp rise in exports, which climbed 8.5 per cent to C$72.8 billion. Shipments of metal and non-metallic mineral products surged 24 per cent to a record high, while energy exports rose 15.6 per cent to their highest level since September 2022, reflecting elevated crude prices amid geopolitical tensions, including the ongoing conflict involving Iran.

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However, the strength was concentrated in a few sectors. Excluding metals and energy, export values rose a modest 1.1 per cent, while volumes slipped 0.3 per cent, indicating uneven underlying demand.

Trade with the United States remained a major driver. Exports to the U.S. increased 8.3 per cent to C$48.51 billion, the highest in a year, supported by higher crude shipments and increased exports of passenger vehicles and light trucks. Imports from the U.S. fell 1.2 per cent to C$41.44 billion, pushing Canada’s trade surplus with its largest trading partner to C$7.1 billion,  a six-month high.

Even so, the U.S. share of Canada’s exports dropped to a record low of 66.7 per cent, highlighting a gradual diversification of trade flows. This shift comes amid tariff pressures from Donald Trump, who has imposed measures aimed at narrowing the U.S. trade deficit with Canada.

Exports to countries other than the US hit a fresh record, rising 9.1 per cent in March, while imports from these markets declined 2.2 per cent, further strengthening the overall trade balance.

The Canadian dollar edged up 0.03 per cent to 1.3620 against the U.S. dollar following the data. Meanwhile, money markets are pricing in two 25-basis-point interest rate cuts by the end of the year, pointing to expectations of a gradual easing cycle despite the improved trade position.