BMO Says Canada's Trade Flows to Remain Under Pressure Until Reaches A Deal With The U.S.

11:58 AM EDT, 03/12/2026 (MT Newswires) -- Canada's merchandise trade deficit widened to $3.6 billion in January from $1.3 billion in December, said Bank of Montreal (BMO) after Thursday's data.

Exports dropped 4.7% month over month, with weakness across the board. Autos (-21.2%) were notably lower as production saw longer-than-normal seasonal stoppages, while models were changed, so the bank could see some retracement as production recovers.

Metal and non-metallic mineral products fell 8.0% month over month on lower gold shipments to the United Kingdom, while transport equipment (-16.0%) declined after a strong 2025.

One bright spot was in energy (+4.1%) as harsh winter weather in the United States raised demand and prices. As the conflict in the Middle East has driven energy prices higher since then, this is one area that will continue to increase in the coming months.

Meantime, imports fell 1.1% month over month, driven by autos (-4.5%) and electronics (-3.6%, as chip shortages weighed on smartphone imports). Industrial machinery and equipment rose 3.4% as a liquefied natural gas project in British Columbia shipped in construction equipment from China.

In volume terms, exports declined 6.1% month over month while imports fell a lesser 2.4%. Along with the 1.5% drop in wholesale trade volumes -- also released on Thursday -- the economy looks to have kicked off the year on soft footing, with some downside risk to Statistics Canada's flash estimate for flat growth, added the bank.

The services trade account deteriorated from a small surplus ($400 million) in December to a small deficit ($100 million) in January. Altogether, Canada's total trade deficit widened from $900 million to $3.8 billion.

Despite some temporary factors, weather, auto production disruptions, January's trade figures were soft against a backdrop of elevated uncertainty, according to BMO. While higher energy prices will help those exports in the coming months, other trade flows will remain under pressure until a deal with the United States is reached.

MT Newswires does not provide investment advice. Unauthorized reproduction is strictly prohibited.