Numbers buoyed by a 3.1% increase in motor vehicle exports to $7.8 billion.
Exports rose 2.3% to nearly $45.5 billion and were concentrated in non-energy products.
Exports to countries other than the US fall 1.6% to $10 billion.
Commerce Department says data reflects flood of imports.
Deficit was far bigger than the $850 million that economists had expected.
Unifor, USW cite growing trade deficit as a potential threat to Canadian auto sector, jobs.
Transportation related industries contributed to the decline in exports: Statistics Canada.
Demand for energy products, motor vehicles and parts, and aircraft lead imports jump.
Canada merchandise trade deficit with the world grew to $931 million in July from $460 million in June.
A weakening Japanese yen has helped export manufacturing, especially for machinery and autos.
US exports fall 1% to $183.3 billion, lowered by weak auto, telecommunications and heavy machinery sales.
163,000 jobs in July, the biggest increase since February.
Deficit reduction helped by cheaper oil that lowered imports and more exports to Europe and China.