Released this morning, the trade data for January show a decline in Canada’s merchandise exports, more than reversing December’s gain.*

However, January’s decline of 4.7% is not necessarily indicative of what to expect for the rest of the year due to some extenuating circumstances.

A large portion of the drop in monthly exports was due to “atypical production stoppages” in the auto sector in January that will not be a factor going forward.

The other main culprit is unwrought gold. After helping to push up exports of metal and non-metallic mineral products by 17.9% in December, lower shipments of gold to the United Kingdom helped push them down by 8.0% in January.

Of note here is that neither of these factors are the result of U.S. tariffs on Canada.

Most Canadian goods have been entering the U.S. tariff-free due to the U.S. decision to exempt products from Canada that meet the country of origin rules set out in the Canada-United States-Mexico Agreement (CUSMA). The exemption included goods affected by the blanket 35% "fentanyl" tariff that was struck down by the U.S. Supreme Court on February 20. Thankfully, it also applies to the temporary 10% U.S. tariff that took effect on February 24.

Yesterday, the Trump administration launched trade investigations affecting multiple countries under Section 301 of the Trade Act of 1974, but -- also thankfully -- Canada was not on the list.

Despite these exemptions, punishing sector-specific U.S. tariffs are in place that affect multiple Canadian products including steel, aluminum, copper, wood, and vehicles and vehicle parts. We reported on the damaging effects of these sectoral tariffs on Canada’s exports in a previous Twenty-Four.

The exemption of Canada from blanket U.S. tariffs will be tested this year during the review of the CUSMA and could also change literally overnight with a social media post from the President. For now, however, it is shielding Canada from the higher tariffs facing many other countries.

Looking ahead, the Iran war will have a major impact on the trade data starting in March (we get the numbers for February on April 2). Higher oil and gas prices will boost the value of energy products. Higher fertilizer and agri-food prices will do the same for these categories. As with many other economic variables, the longer the war lasts, the larger the impact will be on Canada’s exports and imports in 2026.

In Alberta, lower energy and crop prices last year dampened annual sales and there is evidence of the same in the January results. As with Canada as a whole, rising commodity prices due to the Iran war will have an impact starting in March with the value of Alberta’s energy exports rising along with higher energy prices.

*All trade figures in today’s Twenty-Four are on a seasonally adjusted basis.