Canada's merchandise trade deficit narrowed sharply to $1.3 billion in December, down from a revised $2.6 billion in November, as exports rose 2.6% driven by precious metals and aerospace shipments. CIBC Economist Andrew Grantham noted that gold and precious metals exports accounted for the entire improvement in the trade balance.

Aerospace exports reached a record $3.5 billion, jumping 20.5% month-over-month, primarily from increased business jet and aircraft engine shipments to the United States. The Canadian dollar's appreciation of 1.3 cents against the U.S. greenback typically would have weighed on trade values, but exports still climbed 4.5% when measured in U.S. dollar terms.

Despite the December improvement, Grantham warned that underlying weaknesses persist in sectors affected by U.S. tariffs and geopolitical tensions, particularly in forestry. The annual trade deficit for 2025 widened to $31.3 billion, the largest since 2020, highlighting ongoing challenges in Canada's broader economic landscape.