Canada's balance of international payments, third quarter 2025

Canada's current account deficit (on a seasonally adjusted basis) narrowed by $11.9 billion to $9.7 billion in the third quarter of 2025.

The decrease in the current account deficit in the third quarter was largely due to a narrowing of the trade in goods deficit, as exports increased in the quarter while imports decreased. The investment income and trade in services components also contributed to the overall narrowing of the current account deficit.

In the financial account (unadjusted for seasonal variation), inflows of funds from abroad to finance the current account deficit came primarily from foreign investment in Canadian debt securities. While Canadian investors continued to increase their exposure to US securities, foreign investors rekindled their demand for Canadian securities in the third quarter.

Current account

Trade in goods and services deficit narrows

The trade in goods and services deficit narrowed from $19.1 billion in the second quarter to reach $10.6 billion in the third quarter. The trade in services balance moved from a deficit of $0.7 billion in the second quarter to a surplus of $0.5 billion in the third quarter, led by an increase in the commercial services surplus and a narrowing of the transportation services deficit.

Exports of goods increase, while imports decrease

The trade in goods deficit narrowed by $7.3 billion to $11.1 billion in the third quarter, following a record high of $18.4 billion in the second quarter. On a geographical basis, the goods trade surplus with the United States widened from $10.9 billion in the second quarter to $20.7 billion in the third quarter. Meanwhile, the goods trade deficit with countries other than the United States widened from $29.4 billion in the second quarter to $31.8 billion in the third quarter.

Exports of goods increased 1.8% in the third quarter to $186.0 billion, following a large decline in the second quarter (-12.6%). Higher exports in the third quarter of energy products (+8.2%), largely crude oil, and consumer goods (+4.9%) were partially offset by lower exports of metal and non-metallic mineral products (-4.8%), largely gold.

Imports of goods fell 2.0% to $197.1 billion in the third quarter, a second consecutive quarterly decline. Imports of industrial machinery (-10.1%) was the main contributor to the overall decline as a one-time high-value import recorded in the second quarter did not recur in the third quarter.

Commercial services exports increase more than imports

Exports of services rose 1.8% to $59.8 billion in the third quarter, while imports of services were down 0.3% to $59.2 billion. On a geographical basis, the services trade deficit with the United States narrowed from $0.7 billion in the second quarter to $0.5 billion in the third quarter. Meanwhile, the services trade balance with countries other than the United States went from a balanced position in the second quarter to a $1.1 billion surplus in the third quarter.

The commercial services surplus widened as exports increased by more than imports in the third quarter. Exports of commercial services rose 3.8% to $36.4 billion in the third quarter, largely due to higher receipts of computer services, as well as maintenance and repair services. Computer services were robust in the first three quarters of 2025, reaching a quarterly record high of $8.5 billion in the third quarter.

Imports of commercial services increased 2.2% to $33.9 billion in the third quarter, led by charges for use of intellectual property (+3.0% to $7.3 billion), and scientific and technical services (+7.3% to $3.0 billion).

The transportation services deficit narrowed from $4.8 billion in the second quarter to $4.2 billion in the third quarter. Imports decreased 4.6%, led by marine transport payments, while exports were up 0.9% to $5.7 billion.

Canadian imports of travel services outside the US drop slightly from record-high level of second quarter

The travel services surplus widened from $2.2 billion in the second quarter to $2.3 billion in the third quarter, as imports (-2.7%) declined more than exports (-1.7%). The decrease in imports was due to lower spending by Canadian travellers in both the United States and non-US countries. The decline in spending in the United States was the third consecutive quarterly decline, while the decrease in spending in non-US countries followed a record high level in the second quarter. Travel exports fell largely as a result of lower spending by international students while studying in Canada.

Chart 1: Current account balances

Investment income surplus rises

The investment income surplus, the difference between income earned on international financial assets and paid on international liabilities, widened by $2.9 billion and totalled $7.0 billion in the third quarter. This was largely due to an increase in the direct investment income surplus. Profits earned by Canadian direct investors on their assets abroad increased more in the third quarter than those earned by foreign direct investors on their assets in Canada.

Financial account

Foreign purchases of Canadian securities rebound

Foreign investors increased their holdings of Canadian securities by $80.3 billion in the third quarter, a significant increase following a total divestment of $22.4 billion in the first half of the year. In the third quarter, foreign investors increased their exposure to government debt securities by $42.9 billion, with sizable investments in both short- and long-term instruments. Foreign investment in Canadian equities rebounded in the third quarter, reaching $7.8 billion, following a divestment of $43.6 billion in the first half of the year. This was the highest investment since the first quarter of 2022.

Meanwhile, Canadian investment in foreign securities reached an unprecedented $57.6 billion in the third quarter of 2025, up from $25.8 billion in the second quarter. Canadian investors purchased $31.3 billion of foreign stocks, led by acquisitions of US equity securities (+$29.0 billion), most of which were large capitalization technology shares. Investors also added foreign debt securities (+$26.3 billion) to their portfolios in the third quarter, largely in the form of US instruments.

As a result, portfolio investment generated a net inflow of funds in the economy of $22.7 billion in the third quarter, following two consecutive quarters of net outflows of funds.

Chart 2: Foreign portfolio investment

Direct investment activity slows

Canadian direct investment abroad reached $25.1 billion in the third quarter of 2025, for a total of $60.7 billion since the beginning of the year. Earnings reinvested by Canadian parent companies in their foreign affiliates accounted for most of the activity in the third quarter (+$20.3 billion). Meanwhile, merger and acquisition activities amounted to $3.0 billion, down from $8.5 billion in the second quarter. On a sector basis, the largest investments were in the management of companies and enterprises and the trade and transportation sectors. On a geographical basis, the majority of the investment was in countries other than the United States.

Foreign direct investment in Canada amounted to $18.2 billion in the third quarter of 2025, with the year-to-date value of foreign direct investment now reaching $72.4 billion. Earnings reinvested in Canadian affiliates by their foreign parents (+$9.6 billion) and merger and acquisition transactions (+$5.4 billion) were the largest contributors to the activity in the third quarter. On a sector basis, the largest investments were in the trade and transportation, finance and insurance, and manufacturing sectors. On a geographical basis, two-thirds of the foreign direct investment in Canada in the third quarter originated from both the United States and the United Kingdom.

Chart 3: Foreign direct investment

Table 1: Balance of payments – Not seasonally adjusted

Table 2: Current account – Seasonally adjusted