Canada's current account deficit surged in the first quarter of 2026, reaching $7.2 billion from $1 billion in the previous quarter, as imports climbed to a record high. The figure, released Thursday, surpassed the $4.3 billion expected by economists in a Bloomberg survey.
Record Imports Driven by Gold and Metals
Imports rose 5.5 percent to a record $211 billion, led by metals and non-metallic mineral products, which increased by 38.3 percent. Gold hit an intraday record of more than US$5,500 at the end of January, contributing significantly to the surge. Canadians also sold the precious metal, but to a lesser degree, with metals and mineral exports rising 11.2 percent.
Exports Growth and Energy Sector
Exports overall grew 3.9 percent to $203.3 billion, supported by a 16.1 percent jump in energy products. However, tariffs on cars and metals continued to hurt the Canadian economy. Exports of motor vehicles fell 10.7 percent in the quarter to their lowest level since 2020.
Impact of Tariffs and Geopolitical Tensions
“A wider goods trade deficit drove the deterioration amid significant tariff uncertainty,” said Shelly Kaushik, senior economist with Bank of Montreal. “However, the late-February outbreak of the Iran war marked a shift in trade flows by driving up prices for key Canadian exports, especially energy, in March. High oil prices will continue to support merchandise exports through Q2.”
Investment Income and Foreign Direct Investment
The larger current account deficit also reflected a smaller investment income surplus. This was the 15th consecutive quarter that Canada had such a deficit. Foreign direct investment into Canada in the first quarter fell 31 percent year over year to $22 billion, following a strong end to 2025. Mergers and acquisitions accounted for $12.1 billion of foreign direct investment activity in the quarter, while reinvested earnings contributed another $10 billion. The energy and mining sector attracted $14.7 billion during the period.
Foreign Holdings of Canadian Securities
The report also shows foreign investors increased their holdings of Canadian securities by $57.8 billion in the quarter, as their investment in Canadian bonds reached a record $78.6 billion. Foreign purchases focused on federal government and private corporate debt, while Canadian investors continued reducing exposure to United States government debt.
