Canadian Capital Forum 1: Canada’s Goods Trade Balance Widens on Energy and Machinery Imports
Author(s): Scott Douglas Jacobsen
Publication (Outlet/Website): A Further Inquiry
Publication Date (yyyy/mm/dd): 2025/09/06
Michael Ashley Schulman, CFA, Chief Investment Officer of Running Point Capital Advisors, offers expert insight into current global financial dynamics. Schulman offers timely insights into macroeconomic trends, US fiscal policy, and the global tech landscape.
Schulman shared insights in an interview with Scott Douglas Jacobsen on Canada’s economic outlook. He noted Canada’s goods trade deficit widened to $5.9 billion in June due to surging industrial machinery imports, while energy and agriculture exports offered support. Inflation eased to 1.7% year-over-year, below the 2% target, as the carbon levy’s repeal pulled gasoline prices lower, though core inflation hovered near 2.5%. The Bank of Canada held rates at 2.75%, balancing global peers’ moves. Schulman also discussed fiscal trends, U.S. tariffs, and Canada’s pending CUSMA review.
Interview conducted September 1, 2025.
Scott Douglas Jacobsen: What is Canada’s latest goods trade balance and which sectors drove that change?
Michael Ashley Schulman: There is some good news and some less good news here. Canada’s imports were up about 1.4%, while exports increased a smaller 0.9%, resulting in Canada’s global merchandise trade deficit widening. Canada’s latest goods trade balance shows a deficit of $5.9 billion—that’s Canadian dollars—in June, about $400 million wider than in May, and I think the second largest monthly deficit ever, as a one‑time massive mega-import of industrial machinery for an offshore oil project in Newfoundland puffed up import numbers while exports inched higher on crude and refined petroleum (energy products), and a rebound in farm and intermediate food products. Offsetting forces included softer metals with gold, silver, and platinum imports cooling and a downshift in motor vehicles—export levels are back down to late 2022 levels—possibly thanks to tariff turmoil with U.S. Exports to the U.S. increased in June after falling drastically in April. Anxiety about U.S. tariffs should be or is nudging Canadian exporters to diversify their customer base.
Note: If you want/need a source: https://www150.statcan.gc.ca/n1/daily-quotidien/250805/dq250805a-eng.htm
Jacobsen: What are the most recent CPI and core inflation readings versus the 2% target?
Schulman: Inflation is plodding a slow, quiet retreat. The Consumer Price Index dropped from 1.9% in June to 1.7% year-over-year in July, which is shy of the 2% target; the fall mostly due to declining gasoline prices which I believe is due to the consumer carbon levy being abolished as of April of this year. Inflation excluding gasoline ran at a higher about 2.5%; still above ideal, but not glowing red. More importantly, Bank of Canada Governor Tiff Macklem hinted the bank may reassess how it measures core inflation.
Jacobsen: What did the Bank of Canada decide at its last rate announcement?
Schulman: At the Bank of Canada’s last cameo—for their July 30 rate announcement—they showed no interest in a plot twist. The BoC kept their overnight policy rate frozen at 2.75% for a third straight meeting, which is central‑bank speak for we are not touching the thermostat until the weather proves it has really changed. That said, there was serious debate about the need for a cut.
They offered three possible economic destinies; a tariff‑driven recession, moderate bounce‑back, or mild inflation pressure and signaled readiness to pivot with a rate cut if economic frost spreads, as long as inflation stays tamed. It all sounds familiar to me because it is similar to debates and statements from the U.S. Federal Reserve as they monitor and fathom the data. The big difference is that the BoC doesn’t have a prime minister or president verbally bashing them to lower rates.
In isolation what Canada decides is important, but interest rate decisions are not made in isolation; rate policy is a multiplayer game with global refs, and relative to its peers Canada at two and three quarters percent now sits in the middle of the easing pack. Looser than the Federal Reserve at 4.25% to 4.50%, the Bank of England wobbling between inflation anxiety and growth despair at at 4%, the Reserve Bank of Australia at 3.6%, and the Reserve Bank of New Zealand at 3%, yet still tighter than the European Central Bank at 2.15% and galaxies above the Bank of Japan at 0.5%; call it Goldilocks with a passport and a central bank badge.
This relative positioning matters. If Canadian rates stay below the U.S., the Canadian dollar often gets the short end of the currency stick, which makes imports more expensive and risks importing inflation right back into the economy. On the other hand, being on the lower end of the scale could give Canada a softer landing; more like stepping off a curb instead of bungee-jumping off Tower Bridge. The punchline is that no central bank moves in a vacuum, and Canada’s steady-Eddie stance can make extra sense in the shadow dance of its peers. Direction of travel matters even more, with the Federal Reserve openly teeing up a cut possibly as soon as September 17th, the European Central Bank preaching steady for now, the Bank of England having just trimmed in August, Australia and New Zealand already easing, and Japan quietly rehearsing the idea of more hikes. Thus, for markets, Canada’s next moves will ripple through a crowded dance floor where the tempo is being set as much in Washington, Frankfurt, London, Sydney, Wellington, and Tokyo as in Ottawa.
Jacobsen: What does the Fiscal Monitor show for the year-to-date federal balance and revenue/expenditure trends (Finance Canada)?
Schulman: Scott, is that a trick question for the American? Your fiscal year goes from April to March, so last year, April 2024 to March 2025, was a deficit of about $43 billion. This year, April to June, your Fiscal Monitor shows a year-to-date deficit of $3.3 billion, Canadian dollars again—I just feel compelled to keep clarifying that. Revenues were up nearly 3% helped by stronger corporate and personal taxes and a tariff‑driven jump in customs duties, while program spending rose a higher 4.6% and public debt charges edged down 0.6%. June itself posted a $3.6 billion surplus—so you are seeing whiplash to the positive and the negative—federal budget balancing is akin to fiscal jogging with a stiff headwind and a hat that will not stay on.
Jacobsen: What trade policy steps are pending, e.g., the 2026 CUSMA/USMCA review preparations (Global Affairs Canada)?
Schulman: Let’s start with a framework around this; Canada and China are the only countries that have retaliated against Trump in his trade war, which in Canada were instituted by former Prime Minister Justin Trudeau.
We have to ask if Global Affairs Canada is relevant, how relevant, or just ancient history? It’s consultations closed in October of last year, before Trump won the U.S. presidential election. Its report to shape Canada’s stance for the 2026 joint review of the CUSMA is chock full of information on how the pact has worked well, but the environment may be changing. The review machinery is spelled out in Article 34.7, which sets the decision on a sixteen‑year extension and triggers annual reviews until 2036 if no consensus emerges, while the United States process includes domestic consultations that begin roughly nine months before the review date. The clock is ticking.
Nonetheless, on the trade‑policy front Canada is already in Spring training so to speak because I realize summer just ended and autumn is beginning. Scratch that; let me say that on the trade‑policy front Canada is already moving forward; Prime Minister Carney is dropping many of Ottawa’s retaliatory tariffs to align with U.S. exemptions under the CUSMA while keeping punches up on steel, aluminum and autos, aiming to jump‑start talks. Meanwhile, early domestic consultations and other strategic signaling are underway because who doesn’t love planning for a negotiation a year in advance, right?
Jacobsen: Thank you for the opportunity and your time, Michael.
Schulman: Thank you, Scott. Always happy to chat about our wonderful and dynamic northern neighbor and trading partner.
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