Canada has recorded its first trade surplus in six months, defying forecasts of a deficit thanks to surging oil and gold prices. Canada’s merchandise trade balance swung to a $1.78 billion surplus in March against expectations of a shortfall of $2.88 billion, with total exports rising 8.5% to $72.8 billion, the second-highest level on record. The country’s energy exports jumped 15.6% Y/Y, reaching their highest level since late 2022, largely driven by a nearly 20% spike in crude oil prices amid the war in Iran.
Canada's exports of metallic and non-metallic mineral products reached a record $15.3 billion in March, marking a 24% Y/Y increase thanks in large part to robust gold and safe haven demand amid the global geopolitical turmoil.
The primary driver for the record metals exports was a 37.7% increase in exports of unwrought gold, silver, and platinum group metals, with the UK being a key destination. Meanwhile, exports of passenger cars and light trucks also contributed to the growth, rising 4.5%.
Canada’s trade balance also received a boost from falling imports, with total imports declining 1.6% to $71 billion. The decrease was mainly driven by lower imports of consumer goods, including a 9.3% drop in pharmaceutical products, coupled with a 12.8% decline in aircraft and transportation equipment.
Canada’s trade surplus with the United States widened to $7.1 billion in March, its highest level since September 2025, largely driven by a 8.3% increase in shipments of passenger cars and light trucks to $48.51 billion. In contrast, imports from the U.S. dropped by 1.2% to $41.44 billion.
Canada is doing much less business with its northern neighbor, with the U.S. accounting for just 66.7% of total exports, the lowest level ever, in large part due to tariffs.
The Trump administration has imposed significant tariffs on Canadian goods, including a 50% tariff imposed on Canadian steel and aluminum; 35.2% combined anti-dumping and countervailing duties on soft lumber, 25% tariffs on auto exports, and 50% tariffs on copper and copper products, among other levies. Canada initially announced reciprocal, dollar-for-dollar tariffs on $30 billion worth of U.S. goods but removed many of them in September 2025 after some U.S. exemptions. However, it still maintains retaliatory tariffs on specific U.S. steel, aluminum and auto products.
That said, economists from institutions like TD Economics and RBC have noted that despite the nominal surplus, Canada’s exports actually edged down 0.3% in volume terms, suggesting the surplus was largely driven by price increases rather than increased economic activity.
Given this backdrop, it’s quite likely that Canada’s large trade surplus will narrow in the coming months as oil and gold prices correct. Oil prices have declined from recent highs, mainly driven by rising optimism over a potential Iran-US agreement and reduced geopolitical risk premiums. Brent crude for July delivery was trading at $100.62 per barrel at 14.30 pm ET on Thursday, sharply lower from nearly $115/bbl recorded on Monday’s intraday session, while WTI crude for June delivery was changing hands at $95.10/bbl, down from more than $106/bbl on Monday.
Reports have emerged that the U.S. and Iran are close to agreeing on a one-page memorandum to end the conflict and reopen the Strait of Hormuz. Trump has paused the military's "Project Freedom" operation to facilitate talks and has predicted a complete and final agreement could be reached within days. On their part, Iranian officials have acknowledged having "very positive discussions" mediated by Pakistan, though they are yet to issue a formal response to the latest U.S. proposal, which reportedly includes demands to suspend their nuclear program.
Trump has also expressed confidence in a relatively quick solution to the Ukraine war: Last week, Trump told reporters that he discussed a ceasefire between Russia and Ukraine with Putin. Trump told reporters he instructed Vladimir Putin to focus on ending the conflict in Ukraine rather than assisting with Iran's nuclear program, even as Moscow continues to demand that Ukraine cede territory and drop NATO aspirations.
Meanwhile, we previously reported that the war in Iran is rewriting safe-haven rules, with gold prices pulling back sharply from recent highs. While gold initially surged to record highs above $5,400 following the outbreak of the war, it has since plummeted to around $4,715 from its January peak of over $5,590 per ounce, with the safe-haven failure primarily attributed to a massive unwind of what had become the market's most crowded trade. Massive speculative capital and leveraged bets had poured into gold throughout late 2025 and early this year, leaving the market vulnerable to a "stampede-like" sell-off when sentiment shifted.
While the war initially boosted gold, the resulting surge in oil prices above $110 per barrel shifted the narrative from a geopolitical shock to an inflation shock. Surging inflation led markets to price in rate hikes instead of cuts. High interest rates increase the opportunity cost of holding non-yielding gold, favoring yield-bearing assets like bonds. The Federal Reserve recently held interest rates steady at 3.5%-3.75% in March, marking a pause in cuts as policymakers weigh inflation risks from the Iran war against a softening labor market. Traders are now betting on an additional 20-44 basis points of rate increases by the end of 2026, reversing previous forecasts for cuts. In panic-stricken markets, investors and institutions sold gold--one of their most liquid and profitable assets–to raise cash for margin calls or to cover losses amid crashing equity markets.
By Alex Kimani for Oilprice.com
