Royal Bank of Canada (RBC) economists Abbey Xu and Nathan Janzen note that Canada’s merchandise trade surplus increased to $4.2 billion in May from $3.4 billion in April, as exports grew and imports slipped. They highlight weaker energy price support, falling export volumes, and rising industrial machinery imports as signs of shifting demand and improving business investment within an uncertain trade environment.

Surplus grows as volumes soften

"Canada's merchandise trade surplus widened to $4.2 billion in May from $3.4 billion in April (revised upward from $2.7B), as exports rose 0.9% while imports declined 0.2%."

"Still, monthly trade data are heavily influenced by commodity prices and individual product categories, making it important to look beyond headline values when assessing underlying conditions."

"Export volumes excluding price effects fell 0.5% in May, providing a clearer read on underlying foreign demand, but are still tracking a large increase in the second quarter as a whole."

"Industrial machinery and equipment imports jumped 6.1% from April (up 12.8% year-over-year), offering a signal that business investment is edging higher as firms navigate an uncertain trade environment."

"Trade flows continue to be shaped by uncertainty surrounding U.S. trade policy, although our broader expectation remains that trade will become less of a drag on Canadian growth than it was in 2025 as the international environment gradually stabilizes."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor. Know more.)