By Robb M. Stewart
OTTAWA--Canada's trade balance deteriorated slightly in October, swinging the country to an eighth deficit in the first 10 months of last year, though with domestic investment and efforts to lessen the country's reliance on shipments to the U.S.
Canada recorded a merchandise-trade shortfall of 583 million Canadian dollars, the equivalent of about US$421 million, Statistics Canada said Thursday. That wasn't as bad as the C$1.5 billion gap economists anticipated, but it marked a reversal from September's surprise C$243 million surplus, a figure revised up slightly from the prior estimate.
The value of Canadian goods exports rose 2.1% from the month before to C$65.61 billion, a second increase running but softer than the pace seen in the previous month. Imports, after declining in September, rebounded 3.4% to C$66.19 billion.
The growth in exports came largely from shipments of gold, which were particularly volatile in 2025 as the price touched a series of fresh highs thanks to central-bank buying of the metal and as investors sought out perceived safe-haven investments. Stripping out a nearly 50% surge in exports of precious metals and their alloys in October, Canadian exports declined 2.5%.
The biggest drag on shipments came from energy, Canada's largest export. Exports of crude oil and bitumen fell with a drop in prices and refinery shutdowns in the U.S., though a jump in crude-oil deliveries to China, alongside strong gold shipments to the U.K., helped drive a 15.6% October surge in overall exports to countries other than the U.S. to the highest level on record.
"There were some tentative signs of exporters reducing their reliance on the U.S.," Alexandra Brown, economist at Capital Economics, said.
U.S.-bound exports dropped 3.4% for the latest month while imports of American goods snapped a three-month run of declines and increased 5.3%, sharply narrowing Canada's longstanding surplus with its biggest trading partner to C$4.81 billion from C$8.37 billion the month before.
Canadian exports to the U.S. fell 4.1% over the first 10 months of 2025, and the share of goods headed to the U.S. declined to a post-pandemic low of 67.3%, the second-lowest share in the past decade. It was also the third month of last year that the total share fell below 70%. A rise in exports of crude oil headed to countries beyond the U.S. partially explains the move, with the share of overall volumes rising to 8.3% in the 10 months through October against a 4.4% share the year before, or 6.2% for the June-to-October period in 2024 after an expanded export pipeline became operational, data from Statistics Canada showed.
While Canada's surplus with the U.S. narrowed, the deficit with other countries narrowed in October to its lowest since January 2021 at roughly $5.4 billion against September's C$8.1 billion shortfall.
On the imports side, growth for the month was broad based. Inbound shipments of electronic and electrical equipment and parts were up sharply, as were imports of metal and mineral products.
In volume terms, overall imports were up 2.6% month over month while exports fell 0.4%. That indicates a modest drag on economic growth for the month, though Capital Economics's Brown said the strength in imports bodes well for investment.
Previously released industry-level gross domestic product data showed a 0.3% contraction in October with a sharp pullback in goods-sector activity, though an advance estimate indicated GDP edged up 0.1% in November. Statistics Canada's trade report is still catching up after last year's U.S. government shutdown temporarily halted the exchange of data between the countries, and trade figures for November are set to be released late this month just before the next GDP numbers.
"The mild deterioration in the trade balance was expected, and partially offset by ongoing strength in gold exports," Shelly Kaushik, senior economist at Bank of Montreal Capital Markets, said. "While some evidence of diversification can be seen in the data, trade flows will continue to be under pressure as tariff and geopolitical uncertainty remain elevated."
Shipments of metals and minerals globally jumped 27.3% in October, while precious-metals exports leapt 47.4%, helped by higher prices. Compared with a year earlier, exports of precious metals have more than doubled.
When international trade in goods and trade in services were combined, Canadian exports rose 1.5%, outpaced by a 2.3% lift in imports. As a result, Canada swung to a C$59 million trade deficit incorporating both goods and services from a C$607 million surplus in September.
Write to Robb M. Stewart at robb.stewart@wsj.com
(END) Dow Jones Newswires
01-08-26 1157ET
