December gap smaller than expected
Canada’s trade balance improved at the end of the year, even as the country’s export reliance on the United States declined to historic lows. Statistics Canada reported a trade deficit of 1.31 billion Canadian dollars in December, a marked improvement from November’s revised 2.59 billion dollar shortfall and well below market forecasts of a 2 billion dollar gap.
The narrowing deficit was supported by strength in metals and non metallic mineral shipments. Total exports advanced 2.6 percent in December to 65.63 billion Canadian dollars. A significant contributor was unwrought gold, benefiting from higher global prices.
Export diversification gains traction
While shipments to the United States increased 1.1 percent during the month, the U.S. share of Canada’s total exports fell to just over 67.4 percent. That proportion represents the lowest level since record keeping began, excluding two months at the height of the pandemic in 2020. By comparison, the U.S. accounted for 76.2 percent of Canadian exports a year earlier.
For the full year, the U.S. share dropped to 72 percent from 76 percent in the prior year, suggesting a broader diversification trend rather than a single month fluctuation. Exports to markets outside the United States rose 17 percent in 2025, reaching record levels in December. Shipments of gold to the United Kingdom led much of the recent momentum.
Stuart Bergman, chief economist at Export Development Canada, said the rise in non U.S. exports highlights the resilience of the country’s trade sector. Although commodity prices played a role, he noted that certain manufactured goods also posted gains.
Imports shift trade balances
On the import side, purchases from the United States increased 3.5 percent, outpacing export growth and reducing Canada’s merchandise surplus with its largest trading partner to 5.7 billion Canadian dollars in December, down from 6.5 billion in November.
Meanwhile, imports from non U.S. countries declined by 3 percent during the month. As a result, Canada’s trade deficit with nations other than the United States narrowed to 7 billion Canadian dollars from 9 billion in November.
The latest data point to a rebalancing in Canada’s external trade relationships, with steady expansion in alternative markets offsetting fluctuations in bilateral flows with the United States.
Market reaction muted
Financial markets showed limited reaction to the report. The Canadian dollar edged lower by 0.12 percent to 1.3711 against its U.S. counterpart, equivalent to about 72.93 U.S. cents. Yields on Canada’s two year government bonds rose slightly to 2.354 percent.
As Canada continues to diversify export destinations, analysts will watch whether the shift represents a durable structural adjustment or remains driven largely by commodity cycles. December’s figures suggest momentum beyond the U.S. market is building, even as cross border trade remains central to the country’s economic outlook.
