Tariffs likely not a big issue for Canada, RBC says

RBC assistant chief economist Nathan Janzen noted that Canada’s trade balance remained in surplus for a fourth consecutive month in June, with stronger gold exports offsetting lower energy exports.

In an Aug. 4 note, Janzen also noted that the merchandise trade surplus widened slightly to $3.9-billion in June from a downwardly revised $3.7-billion in May.

Canada’s monthly trade data is volatile, but Janzen said net trade is tracking as a sizable contributor to Q2 GDP growth. That is broadly consistent with earlier monthly GDP data pointing to roughly one percentage point of upside risk to RBC’s 2.2% Q2 GDP growth forecast.

The June surplus was driven by a 28% jump in gold exports, which offset a price-related 10% decline in energy exports. Excluding those volatile categories, Janzen said trade flows showed further signs of stabilization.

Export volumes hit a record high in Q2, rising at an annualized 23% pace from Q1 and 9.5% from a year earlier, when trade was pressured by new U.S. tariffs imposed in spring 2025. About 40% of the Q2 export volume increase came from a rebound in auto exports after winter production disruptions.

Steel export volumes remained weak, down 12% from a year earlier.

Imports fell 1.8% in June after a 0.5% decline in May, but were still up at an annualized 5.8% pace for Q2. Janzen said import details point to a potentially sizable increase in Canadian business investment, with industrial equipment imports up 10.6% annualized and electronic equipment purchases up 42.8%, partly tied to processing units for data centres.

Janzen said new U.S. tariffs threatened for later this month would significantly erode Canada’s average relative tariff advantage compared with other major U.S. import markets.

Still, he said more than 80% of Canadian exports to the U.S. would remain duty free because of exemptions for CUSMA-compliant trade and broader product-specific exemptions.

RBC continues to expect a more stable U.S. tariff backdrop in 2026, though still at higher rates for some products, leaving trade as less of a drag on growth than it was in 2025.

Janzen said that, after controlling for price changes and volatile gold shipments, trade data are tracking as an addition of about four percentage points to Q2 annualized GDP growth.

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