Seven months into a renewed tariff war initiated by former U.S. President Donald Trump, Canada's trade picture appears to be shifting. On the surface, data suggests the nation is making progress in its crucial goal of diversifying exports away from its dominant southern neighbour. However, a deeper analysis reveals this gain is largely an illusion, propped up by the meteoric rise of a single commodity: gold.
The Superficial Gain in Non-U.S. Trade
According to the latest figures from October, exports to countries outside the United States climbed to represent 33 per cent of Canada's total export business. This marks a notable increase from less than a quarter earlier in 2024, a statistic that would seemingly please policymakers in Ottawa who aim to double non-U.S. exports within a decade.
Yet economists are urging caution. "While this appears a welcome development, there’s perhaps more to it than meets the eye," warned National Bank of Canada economists Ethan Currie and Stefan Marion. The breakout of the numbers tells a different story, one where price, not volume, is the primary driver.
The Golden Mask on Trade Data
The dramatic surge in Canada's international shipments can be overwhelmingly attributed to precious metals, primarily gold. With the price of gold skyrocketing by approximately 70 per cent since January, the value of exports has ballooned in tandem.
This phenomenon has elevated the sector to unprecedented importance. In October, precious metals accounted for about 13 per cent of all Canadian exports, a record high that saw it temporarily eclipse traditional heavyweights like oil and automobiles. These core sectors are currently under dual pressure from lower global prices and the impact of U.S. tariffs.
Gold shipments alone surged by 47.4 per cent in October, following a nearly 33 per cent jump in September. National Bank analysis indicates about 60 per cent of this gain was due to higher prices, with volumes accounting for the remaining 40 per cent increase from the previous year.
The Stark Reality Without Gold
Remove gold from the equation, and the optimistic trade narrative quickly unravels. "Without gold, international shipments would have fallen by 2.5 per cent," the National Bank report clarifies. The metal's influence is so profound it is also distorting Canada's overall trade balance.
While Canada recorded a merchandise trade deficit of $0.58 billion in October—a figure better than economists anticipated—that shortfall would have been catastrophically deeper without the yellow metal. Excluding gold, the deficit would have ballooned to $8.2 billion.
Jocelyn Paquet, a senior economist at National Bank, summarized the situation starkly: "Therefore, it is fair to say that the explosion in prices and demand for the precious metal is partly masking the effects of tariffs imposed by Washington in the trade data."
The Path Forward and CUSMA Imperative
The analysis underscores that Canada's apparent trade diversification is, for now, more a function of favourable market conditions for a specific resource than a fundamental restructuring of export markets. True, volume-based diversification away from U.S. reliance is not advancing at the pace the headline numbers suggest.
Economists agree that trade diversification remains a vital long-term goal for Canadian economic resilience. However, the immediate priority and the nation's near-term economic fate are inextricably linked to a different objective: renewing the preferential treatment under the Canada-United States-Mexico Agreement (CUSMA).
With the U.S. trade deficit shrinking to its smallest in a decade and exports from its key partners declining, the data reveals an economy where a shining performance in one sector is glossing over broader challenges in others. The gold rush provides a temporary buffer, but it cannot replace the need for secure access to Canada's largest trading partner and sustainable growth in non-U.S. markets.
