Canada's Trade Deficit Surges Amidst U.S. Tariff Threats

In February, Canada's trade deficit rose unexpectedly to C$1.52 billion from a surplus of C$3.13 billion in January. Exports and imports remained high despite a decline in energy exports. Businesses built inventories in the U.S. to counter U.S. tariff impacts, influencing Canada's trade statistics.

Canada experienced an unexpected shift into a trade deficit in February, data revealed on Thursday. Despite near record-levels in both exports and imports, the nation recorded a C$1.52 billion deficit, a sharp turn from the 32-month high surplus of C$3.13 billion seen in January, according to Statistics Canada.

Analysts from Reuters had predicted a trade surplus of C$3.55 billion for February. The merchandise trade surge observed since November has been attributed to the looming tariff threats from U.S. President Donald Trump, prompting businesses, mainly in the U.S., to stockpile inventories in response to anticipated cost increases.

Statistics illustrated that while exports fell by 5.5% in February to C$70.11 billion, the figures remained the second-highest since May 2022. Energy products saw the largest export decline at 6.3%, driven by falling crude oil prices. Imports, conversely, rose by 0.88% to C$71.63 billion, marking a fifth consecutive monthly increase.

(With inputs from agencies.)