Canada’s Record Deficit and Trade Collapse Sparks Economic Concerns

Canada's current account deficit surged to an unprecedented $21.16 billion in Q2, marking the largest shortfall ever recorded. The collapse was driven by a 13.1% plunge in goods exports—the steepest quarterly drop in years—dragging total export values to their lowest since 2021. A record C$19.60 billion trade deficit in physical goods underscored the damage, with shipments to the U.S., Canada's largest trading partner, bearing the brunt.

President Trump's reimposed tariffs on steel, aluminum, and automobiles hammered cross-border commerce, triggering a 25% nosedive in passenger vehicle exports. The Ripple effect was severe: GDP contracted at an annualized 1.6%, nearly triple economists' forecasts, compounding Q1's 2% decline. Foreign capital flight exacerbated the crisis as every component of the current account—trade, services, investment income, and transfers—flashed red.