The closure of the Strait of Hormuz following the start of the Iran war in March has caused a significant escalation in global trade uncertainty. Although still below the peak observed last April, the current level of uncertainty is comparable to the highs experienced during the pandemic.

This context sets the stage for an analysis of Canada's merchandise export performance over the first two months of the year in today’s Twenty-Four.

A story dictated by prices and tariffs

National export values declined by 11.3% year-to-date (YTD) over the first two months. The weakness was observable across most sub-sectors and primarily caused by two factors. The first was softer commodity prices seen earlier in the year. The second key driver was the substantial amount of export activity that was "front-loaded" during the same period in 2025 in anticipation of new U.S. tariffs.

• Energy: Despite robust production and export volumes, lower prices for both oil and natural gas caused the value of energy exports to drop sharply and account for roughly one-third of the total YTD reduction in merchandise exports.
• Widespread declines: Several other major categories, including farm, fishing and intermediate food products, autos, and consumer goods experienced declines in export values due to a combination of lower export prices and reduced volumes.
• Notable exception: Metals and non-metallic mineral products stood out. Export revenues in this category were boosted by a nearly 30% rise in export prices, partly driven by a surge in gold imports from the U.S. over the same period.

U.S. share of exports at a nadir

Canadian exports are inherently volatile, influenced by various factors such as market demand, commodity prices, tariffs, supply-chain issues, and seasonal patterns, making the future trajectory of the U.S. share uncertain. Despite this, goods exports to the U.S. continued their weak trend, posting year-over-year declines for the eleventh straight month in February. Consequently, YTD export values to the U.S. fell sharply by 24.2%.

While the U.S. remains Canada's largest international customer, its proportion of total Canadian goods exports has been steadily decreasing since 2023, hitting a historic average low of 68% in January and February.

Conversely, goods exports to countries other than the U.S. saw a robust increase of 38%. Notably strong growth was seen in exports to the UK (+182%), China (+20%), Germany (+39%), and France (+46%).

Alberta's similar performance

Alberta's export performance mirrored the national trend during the first two months of the year. The substantial decline in oil and natural gas prices was the dominant factor. Alberta's energy exports fell by 17% YTD, despite production staying elevated, and were responsible for the majority (89%) of the total provincial export decline of 15% through February.

Exports from Alberta to the U.S. were down 18%. This decline was only partially mitigated by higher exports to non-U.S. destinations, such as China and Australia.

What’s to come?

While the Iran war and associated trade disruptions remain central concerns, several other key developments occurred in tandem in March that are likely to provide a boost to export values going forward:

• Energy tailwinds: West Texas Intermediate (WTI) oil prices averaged US$91 in March, up from US$65 in February. Furthermore, the Trans Mountain Expansion (TMX) pipeline is expected to reach capacity by April. These factors are expected to significantly boost energy export values.
• Tariff updates:
• China: On March 1, the Chinese tariff on Canadian canola seed was reduced from 85% to 15% and the tariffs on canola oil and meal, peas, pork and seafood were suspended.
• U.S.: The U.S. Supreme Court ruled President Trump's use of emergency powers to impose sweeping tariffs—including the blanket 35% "fentanyl" tariff on Canadian goods and the reciprocal tariffs announced last year on "Liberation Day"—illegal on February 20. However, U.S. sectoral tariffs remain in place, and as of March, Canada (along with other countries) became subject to a blanket 10% tariff on all non-CUSMA compliant goods.

Answer to the previous trivia question: The world record for the largest chocolate Easter egg was set in Italy in 2011. The egg’s circumference was 19.6 m and it weighed 7,200 kg.

Today’s trivia question: Which U.S. state imports the most (in dollar value) from Alberta?