Gold and aerospace sectors surge, narrowing Canada's trade deficit

2026-02-20 03:08:20

Investing.com - Canada’s December merchandise trade deficit significantly narrowed, from CAD 2.6 billion revised in November to CAD 1.3 billion. This improvement was mainly driven by a 2.6% increase in exports, with a rebound in precious metals and record-breaking shipments in the aerospace sector playing important roles.

CIBC economist Andrew Grantham pointed out the impact of these specific sectors on the overall monthly performance. “All the highlights in December were actually gold; this volatility in a few sectors was the sole reason for the narrowing of Canada’s merchandise trade deficit compared to the previous month,” Grantham said in a report.

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The Canadian dollar appreciated by 1.3 cents against the US dollar, which had a key impact on the monthly data. Although a stronger currency usually reduces trade volume measured in CAD, exports still grew by 4.5% when calculated in USD.

Exports of aircraft and transportation equipment reached a record high of CAD 3.5 billion, up 20.5% month-over-month. This surge was mainly due to increased shipments of business jets and aircraft engines to the United States in the last month of the fourth quarter.

Despite these achievements, potential weakness remains in sectors heavily affected by ongoing geopolitical tensions and trade barriers. Grantham warned, “Trade levels remain subdued due to tariffs and related uncertainties in the US,” particularly highlighting the difficulties faced by the forestry sector.

The outlook for 2025 remains cautious, with Canada’s trade deficit expanding to CAD 31.3 billion, the largest gap since 2020. While net trade is expected to make a positive contribution to Q4 GDP, reliance on gold and aerospace highlights the overall economic divergence in Canada.

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