Canada’s export shift away from the United States in 2025 was driven mainly by gold shipments. Without gold, the increase in exports to non‑US partners appears smaller.
Canada’s total exports have struggled to rise over the year, even as exports are redirected to other markets. Higher gold prices boosted the value of shipments, including gold that was already being sent overseas.
Gold Driven Export Shift
The US trade deficit did not change much in 2025, but trade patterns and product mixes shifted. These changes were most visible in Canada’s export data.
Tariffs are being challenged on legal grounds, which could reduce global tariff levels. At the same time, targeted tariffs in specific sectors continue to affect trade.
Canada’s tariff position is linked to the upcoming review of the USMCA agreement. USMCA exemptions led firms to seek compliance, and sector‑specific US tariffs now make up most of Canada’s effective tariff rate.
We saw last year in 2025 that Canada’s export diversification was largely an illusion driven by gold, masking a weaker underlying trade picture. This reality means the economy is more fragile than those headline numbers suggested. Our focus must now shift entirely to the upcoming political risks tied to U.S. trade.
Usmca Review Market Risk
The upcoming USMCA review is the most significant event for the Canadian dollar in the coming weeks. We only need to look back at the 10% swings in the USD/CAD pair during the tense 2017-2018 NAFTA renegotiations to see the potential for extreme volatility. Recent reports show one-year implied volatility on CAD options has already risen to over 9%, indicating that traders are actively pricing in this uncertainty.
Traders should look beyond broad index plays and focus on specific sectors now vulnerable to targeted tariffs. The auto parts and manufacturing sectors are particularly exposed, as they made up over 15% of total goods exports to the U.S. in the last quarter of 2025. Buying put options on Canadian industrial ETFs or shorting futures on the S&P/TSX Capped Industrials Index could serve as a direct hedge against negative headlines from the review.
The surge in gold prices during 2025, which propped up trade statistics, cannot be relied upon to support the currency this year. With other key commodity exports like oil facing their own price pressures, the Canadian economy looks particularly vulnerable without guaranteed preferential U.S. trade access. This makes any negative development from the USMCA review a disproportionately large risk.
