Canada's merchandise trade surplus widened in September as exports edged higher and imports fell. Exports were, however, driven by two product categories, energy and gold, which were aided by higher commodity prices. Without the increase in these two categories, exports declined over the month, demonstrating the impact from fresh trade tensions with the US.

• Canada’s trade surplus widened to its highest level since May 2022. Statistics Canada reported that the merchandise trade surplus rose to $5.35 billion in September from a revised $4.95 billion in August and above the $5.00 billion economists expected, based on a Bloomberg survey.
• Total exports rose by 0.2% to a new record high of $78.6 billion. Energy exports increased by 8.2%, and metal and non-metallic mineral exports, which include gold, rose by 8.6%. Excluding these two product categories, exports declined by 5.6%.
• Conversely, imports declined, falling by 0.3% to $73.2 billion in September. The decline was driven by a 9.1% drop in motor vehicles and parts purchases.
• Export volumes were softer. In real terms, which adjust for price changes, exports fell by 4.0% and imports declined by 2.5%. This suggests the gain in export value reflected higher prices more than higher shipments.
• Meanwhile, the US trade deficit narrowed in September. Exports grew at a slightly faster pace than imports over the month.

The US midterm elections may shape trade tensions. Democrats won control of Congress, and tariffs were an issue in several border-state races, which could give lawmakers more leverage. However, US President Donald Trump keeps the executive powers used to impose tariffs, so relief is not guaranteed. Trump previously said a “great deal” with Canada is imminent, and Canadian Prime Minister Mark Carney said both sides have made progress.

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