Canadian Exports to US Drop 6.6% Amid Tariffs; Mazda Halts Canada CX-50 Production, Trade Deficit Narrows

Canadian exports to the United States declined by 6.6% in March 2025 following the implementation of new U.S. tariffs under President Donald Trump, including 25% tariffs on steel, aluminum, and automobiles. This decrease was nearly offset by a 24.8% increase in Canadian shipments to other countries such as the United Kingdom, Netherlands, and Germany. Canada's trade deficit narrowed from CAD 1.4 billion in February to CAD 506 million in March, while imports from the U.S. fell by 2.9%. The average U.S. tariff rate on Canadian imports rose to 1.9% in March. The CUSMA/USMCA free trade agreement became more critical, with the share of compliant Canadian exports rising to 50%. Canada's trade surplus with the United States narrowed to CAD 8.4 billion. Prime Minister Mark Carney, who recently won reelection, was scheduled to meet President Trump to discuss strained trade and security ties. Trump has also issued threats to annex Canada. Canadian manufacturing, which sends 42% of its output to the U.S. and employs 1.7 million workers, has been particularly affected. Many Canadian companies are seeking alternative markets. PNP Pharmaceuticals is expanding in Asia, LabelPak Printing is reducing its 15% U.S. sales, and Concept Factory and Wellmaster are lowering prices or renegotiating contracts. Fusion TG reported its sales dropped by one-third in the first quarter. Some firms are setting up offices in Europe and Asia to reduce U.S. exposure. Mazda announced it will halt production of its CX-50 SUV for the Canadian market at its Alabama plant from May 12, redirecting those vehicles to the U.S. market. The Mazda-Toyota Alabama plant will maintain overall output, with the shift expected to increase U.S.-bound production by about 10%. The CX-50 accounted for 15% of Mazda's 2024 Canadian sales. Analysts expect further trade challenges as the full impact of tariffs is felt in the coming quarters, although reciprocal tariffs on Canada have so far been avoided.