Canada’s January commodity trade surplus rose to its highest level since May 2022. This is because both exports and imports have skyrocketed in the face of the threat of tariffs by the US.
TD Bank economist Rishi Sondy says the export strength shown in January reflects companies seeking to stockpile inventory ahead of tariff levies.
“This dynamic could potentially lift exports in February, but it could fade afterwards,” Sondhi wrote in a note to his client.
“Indeed, the negative impact on US freight will be one of the main channels that can harm the Canadian economy. A weak Canadian dollar could give you some offset, but it adds to Canadian tariff-related inflationary pressures.”
The US attempted to impose sweep duties on goods coming from Canada and Mexico on March 4th, but then began back pedaling.
US President Donald Trump said Thursday that goods coming from Mexico under the USMCA would not face tariffs until April 2nd. U.S. Secretary of Commerce Howard Lutnick also said Canada’s tariffs are likely to be delayed for a month on most goods and services.
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The move comes after Trump granted a one-month tariff exemption on vehicles traded under the Canada-Mexico agreement on Wednesday.
Statistics Canada said the country’s trade surplus in January was $4 billion, following a revised surplus of $1.7 billion in December. The first read for the last month of 2024 was a $708 million surplus.
BMO senior economist Shelley Kausic said that there will be added noise to the data for the first few months of the year, given that tariffs were actually imposed in the beginning of March and removed for cars until April.
“Even so, early readings suggest trade flows supported by January’s tariffs and weak Rooney. Looking ahead, trade is expected to focus on growth as long as tariffs are in place, but weaker Rooney could absorb some of the hits,” she said.
The January trade surplus came as total exports rose 5.5% to a record of $74.5 billion.
Automobile and parts exports increased by 12.5%, while passenger cars and light truck exports increased by 17.1%. Energy products exports increased by 4.8%, which helped raise oil and natural gas prices.
Total imports rose 2.3% to $70.5 billion.
Canada’s commodity trade surplus with the United States was a record $14.4 billion in January, compared to the $12.3 billion surplus in December.
Exports to the US increased 7.5% in January to a record $58.2 billion, while imports from the US increased 4.7% to $43.8 billion.
Canada’s trade deficit with non-US countries was $10.4 billion that month, compared to $10.6 billion in December.
From a volume perspective, total exports increased by 4.5% in January, while total imports increased by 1.5%.
