09:25 AM EST, 03/06/2025 (MT Newswires) -- Canada's merchandise trade balance widened from a revised C$1.7 billion in December to C$4.0 billion in January, noted TD.

This marked the largest surplus since May 2022.

Merchandise exports jumped 5.5% month-on-month, following a 6% monthly gain in December. Exports of motor vehicles and parts (+12.5% month over month) jumped, while shipments of energy products (4.8% month over month), consumer goods (+7.8%) and industrial machinery, equipment and parts (12.6%) added to the headline gain.

Merchandise imports also moved higher in January (2.3% month over month), bolstered by a surge in imports of aircraft and other transportation equipment and parts (23.6% month over month). Imports of electronic and electric equipment and parts (+5.8%) and energy products (+8.5%) also made significant contributions.

In volume terms, merchandise exports rose by 4.5% month over month while imports increased by 1.5%.

Canada's merchandise trade surplus with the United States widened to C$14.4 billion in January from C$12.3 billion the month prior. The threat of U.S. tariffs, exports to the U.S. surged 7.5% month over month while imports increased 4.5%.

The strength in exports shown in January reflected companies attempting to stockpile inventories ahead of the imposition of U.S. tariffs, stated TD. This dynamic could lift exports in February as well but may fade after.

Trade data is often subject to heavy revisions and the bank only has hard data for the first month of the quarter. That said, January's stronger growth in export volumes compared with imports points to a significant contribution of one percentage point or more to Q1 real gross domestic product growth from net trade, added the bank.

Canada's export outlook has soured amid the Canada-U.S. tariff war and the recent 30-day pause on auto sector tariffs does little to remove uncertainty for this industry. 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.