Canada's current account deficit surpasses previous records, escalating during the trade conflict.
In a bid to foster better trade relations, Trade Minister Dominic LeBlanc met with U.S. Commerce Secretary Howard Lutnick on Tuesday. The meeting, which lasted approximately 90 minutes, focused on detailed proposals already circulating between the two sides. These technical talks are aimed at easing pressure from President Trump's duties on key Canadian industries.
The discussion covered concrete proposals that have been on the table, with Canada removing some of its retaliatory tariffs as a step towards easing tensions. However, key U.S. duties on steel, aluminum, autos, and copper remain in place. This move by Canada was a response to Trump's March move to levy broad duties, which Canada countered with 25% tariffs on a wide list of U.S. goods.
The goods trade deficit hit a record C$19.6 billion in Q2 2025, largely due to lower shipments to the U.S., Canada's largest market. Exports to the U.S. dropped 13.1% in Q2 2025, contributing to the widened deficit. This soft export performance likely left Canada's economy flat in Q2 2025, according to Bloomberg's economist poll. In fact, Statistics Canada predicts that Canada's GDP likely saw a 0.7% contraction in Q2 2025, primarily due to weak export performance.
The Canadian current account deficit also widened to C$21.16 billion in Q2 2025, the largest since the early 1980s. These economic challenges have raised concerns, with no clear indications of an announcement regarding the withdrawal of certain tariff measures in Canada or negotiations to alleviate the pressure caused by the President's tariffs on important Canadian industries found in the search results.
Further technical talks will be handled by Canada's ambassador to the U.S., Kirsten Hillman, and United States Trade Representative Jamieson Greer. The outcome of these discussions remains to be seen, but it is hoped that they will lead to a resolution that benefits both countries and helps to strengthen the North American economy.
On a positive note, the Canadian dollar traded around C$1.377 per U.S. dollar and was roughly 4.5% stronger on the year on the date of the report, offering some respite amidst the challenging economic climate.
The final figures for Q2 2025's expenditure- and income-based GDP will be published by Statistics Canada on Friday. These figures will provide a more definitive picture of Canada's economic performance during this period.
In the meantime, both Canada and the U.S. continue to work towards finding a solution that will ease trade tensions and help to stimulate economic growth in North America. The U.S. economy, for instance, grew at a 3.3% annualized pace in the revised release from the Bureau of Economic Analysis on Thursday, offering a glimpse of the potential benefits of a stronger, more harmonious economic relationship between the two nations.
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