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Canada Trade Surplus Widens in May as Net Exports Seen Supporting Q2 Growth, Say Economists

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With merchandise data covering the first two months of the quarter, Canada's trade activity suggests net exports are shifting from a drag in Q1 to a modest tailwind for real GDP growth in Q2, said TD Economics on Tuesday.

May's trade surplus widened to C$4.2 billion, up from an upwardly revised C$3.4 billion in April, said Statistics Canada on Tuesday. May's surplus was significantly above the C$2.9 billion consensus figure provided by Bank of Montreal Capital Markets (BMO) before the StatsCan release.

Exports increased 0.9% monthly, led by stronger shipments of metal ores and non-metallic minerals, including diamonds, while energy exports eased slightly after recent gains. Aluminum exports also rose sharply on stronger shipments to Europe.

"Net exports look to add firmly to growth in Q2, another data point that suggests the Canadian economy has snapped out of its two-quarter funk," wrote BMO Senior Economist Robert Kavcic in a note.

Although the U.S.-Mexico-Canada Agreement (USMCA) on trade wasn't extended last week by President Donald Trump, the deal remains in force and most Canadian exports continue to be exempt from U.S. tariffs. Together with ongoing efforts to diversify export markets, this should help keep export volumes above year-ago levels, wrote CIBC Economics in a note.

Exports to the U.S. are now back above where they were at the start of 2025 -- just before the trade dispute with the U.S. began -- although that largely reflects a sharp rebound in the value of energy exports, BMO said.

Canada's merchandise trade surplus with the U.S. widened to C$11.6 billion in May from C$10.3 billion in April, posting the largest surplus since January 2025, according to StatsCan.

The July 1 USMCA deadline passed without renewal, moving the agreement into rolling annual reviews and extending uncertainty around unresolved issues involving steel, aluminum, autos, lumber, and procurement, added TD.

"This leaves risks modestly tilted to the downside even as solid U.S. demand offers a partial offset," wrote TD Economist Marc Ercolao.

There was little market reaction to Tuesday's trade data release, according to Andrew Grantham at CIBC.

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