Canada's trade deficit narrowed to $135 million in March (previously $1.1 billion), as a 3.8% rise exports outpaced the 1.7% increase in imports.
Imports were up for a fourth consecutive month, increasing 1.7 percent to Can$47.1 billion in March.
Imports from the US - Canada's largest trading partner, by far - were up two per cent, while exports to the US edged down a fraction of a percentage point.
"Combined with a continued creep higher in crude prices, look for energy to continue being a catalyst in supporting Canadian exports", CIBC economist Nick Exarhos wrote in a report.
As a result Canada's trade surplus with the United States narrowed from Can$4.5 billion in February to Can$4.0 billion in March.
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The bounce back in export volumes is certainly a welcome development, but strong imports and weak exports earlier in the year means that net trade will weigh on economic growth in the first quarter of this year. Imports of services decreased less than $0.1 billion to $43.0 billion in March. Exports of services increased $0.3 billion to $64.7 billion.
Statistics Canada noted higher imports of unwrought gold from Japan, and the highest level of imports of industrial machinery, equipment and parts since September 2016.
President Donald Trump is poised to renegotiate the North American Free Trade Agreement, which links Canada, Mexico and the United States, and has threatened to pull out unless the U.S. gets a favorable deal. Energy products rose seven per cent, pushed up by higher natural gas flows to the United States and a spike in exports of coal to Asia that coincided with a slowdown in Australian production caused by a cyclone.
Imports from Mexico hit $28.1 billion, their highest on record, pushing the deficit with the southern neighbor to its highest level in almost 10 years.