Canada’s trade surplus in January exceeded expectations by a wide margin to post a 32-month record as fears of tariffs from the U.S. pushed exports of cars and energy products higher, especially south of its border, data showed on Thursday.
It posted a trade surplus of $3.97 billion (US$2.78 billion), more than double the upwardly revised $1.69 billion seen in December, Statistics Canada said, and posted a record surplus with top trading partner the United States.
U.S. President Donald Trump has slapped a 25 per cent tariff on almost all Canadian imports and after retaliation by Prime Minister Justin Trudeau, he has threatened to stack up more tariffs on them.
On Wednesday, Trump agreed to exempt automakers from the tariffs for one month as long as they comply with the terms of the Canada-U.S.- Mexico free trade agreement, and agreed to look at other products too for similar relief.
Analysts polled by Reuters had forecast Canada’s trade surplus to be at $1.28 billion and have said that trade balances would benefit from companies front-loading orders in January.
“This uncertainty is creating major swings in the data, and we are just getting started,” Andrew DiCapua, Principal Economist, Canadian Chamber of Commerce.
Total exports increased 5.5 per cent in January to a record of $74.5 billion, following a 6% increase in December. A one per cent decline in the value of the Canadian dollar to its U.S. counterpart in January also led to an increase in export value, it said.
In volume terms, total exports rose 4.5 per cent in January, following an increase of 2.6 per cent in December.
The jump in exports was led by an over 12 per cent jump in motor vehicles and parts, followed by a 4.8 per cent increase in exports of energy products, data showed.
The Canadian dollar CAD= was largely stable after the data with the local currency trading weaker by 0.18 per cent to 1.4361 to the U.S. dollar, or 69.63 U.S. cents. Yields on the two-year government bond CA2YT=RR dropped by 1.1 basis points to 2.544 per cent.
Canada’s trade surplus with the U.S. clocked a record of $14.4 billion in January, from $12.3 billion in December. This was led by historically high exports of $58.2 billion to the U.S. Imports from the United States increased 4.7 per cent, Statscan said.
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The trade surplus with the U.S. increased for the third month in a row.
Trump has often indicated that he is unhappy that his country imports more from Canada than it exports and analysts have said that tariffs are also a tool for Trump to reverse this deficit.
However, data shows that its deficit with Canada, which is its second biggest trading partner, is much smaller than its other two top trading partners – Mexico and China.
According to U.S. government data the deficit with Mexico is almost 2.5 times that of Canada, while it is just a fifth of what the U.S. has with China.
Stuart Bergman, chief economist with Export Development Canada said that without energy exports, U.S. would actually run a surplus with Canada.
Services imports, another sector where Canada runs a deficit with the U.S., were down 0.4 per cent on a monthly basis led by a slump in travel services of 5.3 per cent, mainly on lower spending by Canadians traveling to the US, he said.
“This is clear evidence that the current situation is impacting consumer choices,” Bergman said.
Rates for cross-border trucking to and from the U.S. jumped in the lead up to the tariffs on Canada and Mexico, as companies scrambled to accelerate shipments ahead of an expected increase in costs.
It marked a brief moment in the sun for the U.S. trucking industry after a down cycle that has now lasted for nearly three years, the longest and deepest since the global financial crisis. Weak demand and a surplus of trucks on the road were to blame for the low rates.
In the past two weeks, spot rates from U.S. to Canada for dry vans and refrigerated trucks and containers hit a two-year high, having risen 18 per cent and 35 per cent, respectively, since the November election, data from DAT freight & analytics ROP.O showed.
Load volumes for dry vans on the Toronto to Chicago route surged 57 per cent week-over-week before the tariff deadline.
“There’s clear evidence shippers north of the border were desperate to get loads into the U.S. before midnight on Monday this week,” said Dean Croke, principal analyst at DAT.
Rates will likely reverse once the new duties are imposed, Croke added. “Uncertainty in the manufacturing sector due to tariffs will most likely dampen demand even further and therefore reduce truckload volumes in the process.”
In the southern border city of Laredo, Texas, the volume of loads being moved by DAT’s carrier network increased 12 per cent last week, suggesting companies made a last-ditch effort to get loads into the U.S. at the eleventh hour.
The refrigerated goods market saw volumes rise 35 per cent on a weekly basis, driven by an increase in produce crossing into the McAllen freight market in Pharr Texas.
On a month-over-month basis, volumes and rates for dry vans moving from Mexico to U.S. were up 1.5 per cent and 3.5 per cent, respectively, a smaller jump compared with the Canadian border.
–Reporting by Promit Mukherjee, Dale Smith Abhinav Parmar and Lisa Baertlein; Editing by Chizu Nomiyama and Devika Syamnath
