Canada’s merchandise trade surplus in January rose to its highest level since May 2022, as both exports and imports surged in the face of tariff threats by the United States.
TD Bank economist Rishi Sondhi says the strength in exports shown in January reflected companies attempting to stockpile inventories ahead of the imposition of tariffs.
“This dynamic could lift exports in February as well but may fade thereafter,” Sondhi wrote in a note to clients.
“Indeed, the negative impact on U.S.-bound shipments will be one of the primary channels through which Canada’s economy is harmed. A weak Canadian dollar could provide some offset, although would add to tariff-related inflation pressures for Canadians.”
The U.S. moved to impose sweeping tariffs on goods coming from Canada and Mexico on March 4, but has since started to backpedal.
U.S. President Donald Trump said Thursday goods coming from Mexico under the USMCA would not face tariffs until April 2. U.S. Commerce Secretary Howard Lutnick also said tariffs on Canada would “likely” be delayed for a month for most goods and services.
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The moves come after Trump granted Wednesday a one-month tariff exemption for vehicles traded under the Canada-U.S.-Mexico Agreement.
Statistics Canada said the country’s trade surplus was $4 billion for January, following a revised surplus of $1.7 billion in December. The initial reading for the final month of 2024 had been for a surplus of $708 million.
BMO senior economist Shelly Kaushik said that given tariffs were indeed imposed at the beginning of March and then removed for autos until April, there will be added noise in the data for the first few months of the year.
“Still, the early read suggests tariff front-running and a weak loonie supported trade flows in January. Looking ahead, trade is expected to weigh heavily on growth as long as tariffs are in place, though a weaker loonie could absorb some of the hit,” she said.
The January trade surplus came as total exports increased 5.5 percent to reach a record of $74.5 billion.
Exports of motor vehicles and parts rose 12.5 percent, boosted by a 17.1 percent increase in exports of passenger cars and light trucks. Exports of energy products increased 4.8 percent, helped by higher oil and natural gas prices.
Total imports rose 2.3 percent to $70.5 billion.
Canada’s merchandise trade surplus with the United States was a record $14.4 billion in January compared with a surplus of $12.3 billion in December.
The increase came as exports to the U.S. rose 7.5 percent in January to a record $58.2 billion, while imports from the U.S. rose 4.7 percent to $43.8 billion.
Canada’s trade deficit with countries other than the United States was $10.4 billion in the month compared with $10.6 billion in December.
In volume terms, total exports rose 4.5 percent in January, while total imports gained 1.5 percent.
