Canadian export figures are going in the “wrong direction,” according to the latest trade data, with one economist worried it could jeopardize third-quarter growth while another said the outlook is “bleak” given the latest tariff bombs United States President

Donald Trump continues to lob. Canada’s exports fell for the first time in three months as tariffs continue to hurt the movement of goods to the U.S. and trade with other countries has failed to pick up some of the slack.

The country’s trade deficit in goods widened to $6.3 billion in August from an upwardly revised deficit of $3.8 billion in July as exports contracted three per cent and imports rose 0.9 per cent, Statistics Canada said on Tuesday. Economists had estimated the deficit would be $5.6 billion.

The trade deficit in August is not far off from its widest point of $7.5 billion, which was recorded in April.

“The recovery in Canadian trade from Q2’s weakness was never going to be a straight line, and August saw a curve in the wrong direction with the trade deficit widening by more than expected,” Andrew Grantham, an economist at CIBC Capital Markets, said in a note.

He said it’s possible that Canada’s gross domestic product in August could contract rather than come in flat as advanced estimates suggest. That would put third-quarter growth on track to come in weaker.

Statistics Canada attributed much of the drop in exports to a decline in shipments of unwrought gold, primarily to the U.S., but several other sectors were also subject to tariff-induced hardship.

“The worsening in Canada’s goods trade balance in August was for all the wrong reasons, with exports falling and imports rising,” Bradley Saunders, North America economist at Capital Economics Ltd., said in a note. “Admittedly, unwrought gold played a notable role in flows in either direction. But there were still signs of export weakness in other key areas.”

For example, exports of industrial machinery and parts declined 9.5 per cent in August from July, the first drop in four months, according to Statistics Canada.

Subgroups within that larger category also posted declines, including an 11.6 per cent drop in general machinery and equipment, while commercial machinery exports and industry-specific exports to other countries and the U.S. declined.

Exports of forestry and lumber products also fell, with the latter dropping 25 per cent to its lowest level since May 2020 after the U.S. increased countervailing and anti-dumping duties on Canadian goods. The outlook for that sector has since worsened, as Trump has announced 10 per cent tariffs on lumber and 25 per cent tariffs on furniture.

Trade with countries other than the U.S. declined two per cent in August, the third consecutive monthly drop. Statistics Canada said exports of crude oil to Germany and Singapore and nuclear fuel to Japan were the main culprits behind the decline.

The federal government has touted increasing trade with other countries as part of its strategy to counterbalance the effects of U.S. tariffs.

“Looking through the noise, it’s clear that Canadian trade flows continued to face tariff-related headwinds in August,” Shelly Kaushik, an economist at Bank of Montreal, said in a note.

She said the additional sectoral measures announced by Trump since August point to further challenges in the months ahead. Those measures include the lumber tariffs, possible duties of 100 per cent on pharmaceuticals and tariffs of 25 per cent on foreign-made medium and heavy trucks scheduled to go into effect Nov. 1.

“Newly announced U.S. tariffs on lumber and trucks will also weigh on exports,” Saunders at Capital said, adding that “the upshot is that the outlook for the external sector remains bleak.”

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