Canada’s trade deficit narrows more than expected in March as imports fall

Canada's trade deficit narrowed to C$506 million ($366.34 million) in March, beating expectations as imports fell at a faster rate than the drop in exports, data showed on Tuesday.

Imports of goods dropped 1.5% in March driven by a 2.9% slump in imports from the U.S. after Canada imposed retaliatory tariffs on its neighbor following President Donald Trump's 25% tariff on Canadian steel and aluminum from March 12.

Exports to the U.S. also dropped by 6.6% but was almost compensated by an increase in exports to the rest of the world, Statistics Canada said.

Analysts polled by Reuters had estimated total trade deficit to widen to C$1.56 billion in March, up from a revised C$1.41 billion in February.

Trump's tariff threats end of last year and this year beginning had pushed Canadian firms to advance supplies south of the border boosting trade surpluses in December and January. But as tariffs took hold, shipments to the U.S. have squeezed.

U.S. is Canada's biggest trading partner and Trump's tariffs have hurt trade, investments and jobs on both sides of the border.

Canada's Prime Minister Mark Carney will be meeting Trump on Tuesday to start talks on a comprehensive trade and security deal, which experts have said could eventually lead to reducing the burden of tariffs on Canada.

Canada's overall exports for March was at C$69.9 billion down from C$70.04 billion in February, led by the U.S. This was the second month in a row when exports fell.

"Despite the two consecutive monthly declines, export levels remained relatively high in March, posting a 10.2% increase compared with the same month a year earlier," Statscan said, adding lower prices primarily led to the drop.

In volume terms, exports were up 1.8% in March, it said.

However, import fell in both value and volume terms.

They dropped for the first time in five months with the largest contributors being metal and non-metallic mineral products by 15.8% and energy products by 18.8%. In volume terms, total imports edged down 0.1% in March.

Imports in March were at C$70.40 billion, down from C$71.44 billion.