Canada’s monthly merchandise trade picture improved in December, with the deficit falling to $1.3 billion from a revised $2.6 billion in November. The narrowing reflected a 2.6% increase in exports, a gain concentrated in a handful of volatile categories rather than broad-based strength.
CIBC economist Andrew Grantham highlighted the outsized contribution of one commodity to the month’s outcome. "All that glittered was in fact gold in December, with exports in that volatile area accounting for all of the narrowing in Canada’s goods trade deficit relative to the prior month," Grantham wrote, drawing attention to the role of precious metals in the headline figure.
Currency movements played a notable part in the month’s reported values. The Canadian dollar strengthened by 1.3 cents against the U.S. dollar, a move that typically reduces trade totals when measured in Canadian dollars. Despite that headwind, exports rose 4.5% on a U.S. dollar basis, underscoring that higher volumes or prices in some categories offset the translation effect.
The aerospace sector delivered a particularly large contribution. Exports of aircraft and transportation equipment hit an all-time monthly high of $3.5 billion in December, up 20.5% from November. That jump was driven mainly by increased shipments of business jets and aircraft engines to the United States during the final month of the quarter.
Even with those gains, underlying vulnerabilities remain. Grantham cautioned that broader trade activity is still subdued amid policy frictions. "The level of trade remains depressed due to the impact of US tariffs and related uncertainty," he said, specifically flagging the forestry sector as struggling under those constraints.
On an annual basis the picture is less encouraging. Canada’s trade deficit for 2025 widened to $31.3 billion, the largest gap since 2020. While net trade is expected to be a positive contributor to fourth-quarter GDP, the reliance on a handful of strong performances - notably gold and aerospace - highlights a divergence across the wider Canadian economy.
Policymakers and market participants face a mixed signal: headline improvement in the month, but persistent sector-specific pressures and an expanded annual shortfall. The December data illustrate how concentrated gains in volatile or record-setting categories can mask ongoing weaknesses in sectors affected by tariffs and trade uncertainty.