Sri Lanka
USA
Canada
India
UK
UAE
Canada’s current account deficit widened to C$21.16 billion in Q2 2025, the largest shortfall since the early 1980s, as exports to the United States tumbled during ongoing trade tensions.
Statistics Canada reported Thursday that the deficit surged from C$1.32 billion in Q1, far exceeding economists’ expectations of a C$19.3 billion shortfall. The goods trade deficit alone hit a record C$19.6 billion, driven by a sharp 13.1% drop in exports to the U.S., Canada’s biggest trading partner.
The decline came after U.S. buyers stocked up ahead of tariffs in Q1. With American duties on steel, aluminum, autos, and copper still in place, Canada’s external accounts have swung to their weakest point in decades.
Meanwhile, the U.S. economy expanded at a 3.3% annualized pace, while Canada likely contracted at −0.7%, according to Bloomberg’s economist poll. Weak export performance was the key drag.
“Not a great showing for Canada, but it was clearly an exceptional quarter,” said Benjamin Reitzes, rates and macro strategist at BMO. “Those flows need to turn positive or the Canadian dollar could be in for a rough ride.”
By Thursday morning in Ottawa, the Canadian dollar traded at C$1.377 per U.S. dollar, though it remains up about 4.5% on the year.
Trade Minister Dominic LeBlanc confirmed that talks with Washington have made progress, following his meeting with U.S. Commerce Secretary Howard Lutnick. Canada recently removed some retaliatory tariffs to ease tensions, though key U.S. duties remain.
Further negotiations will now be led by Canada’s ambassador to the U.S., Kirsten Hillman, and USTR Jamieson Greer, with both sides working on technical proposals.
The government hopes that scaling back counter-tariffs will pave the way for a new trade and security arrangement, but for now, Canada faces a record current account deficit that underscores the toll of the trade dispute.
