Canada’s trade deficit totalled $1.9 billion in January, a narrowing from December’s $3.1 billion deficit, StatsCan reported Wednesday.

That narrowing “was where the good news ended,” says CIBC senior economist Andrew Grantham in an economics report, as the deficit was “driven exclusively by a plunge in imports.”

Imports decreased 4.3%, mainly due to lower volume of industrial machinery, equipment and parts, reports StatsCan. Exports fell 2.1%, mainly on fewer passenger cars and light trucks.

Grantham notes that export volumes dropped by a “disappointing” 4% to their lowest since June 2016. The drop in exports is “a bad indicator for monthly GDP,” he says.

The “soft recent trend in exports, and the greater uncertainty for the future resulting from U.S. tariffs” give reason for the Bank of Canada to “sound less enthused on the outlook” at its rate decision this morning, Grantham says. The BoC held the overnight rate target at 1.25%.

Read: How a U.S. trade war could affect markets

Notably, nominal imports and exports in January occurred as the loonie gained 2.2 U.S. cents on average relative to the U.S. dollar from December to January, says StatsCan. Import prices fell 0.4%, and export prices grew 1.5%.

“However, import prices were down in nine of 11 commodity sections, while export prices fell in every commodity section except energy products,” says StatsCan. “Excluding the price of energy products, which rose sharply in January, the prices of both imports (-1.1%) and exports (-1.8%) fell.”

Despite the numbers, “we probably shouldn’t read too much into a single month of declines in imports and exports,” says Grantham, noting that market reaction was limited after the report was released.

“However, exports have disappointed for a number of months now, and with increased uncertainty for the future due to steel/aluminum tariffs and NAFTA renegotiations, the BoC will be correct in sounding more cautious regarding that part of their forecast and taking it very slowly in moving interest rates higher from here,” he says.

Read the full reports from StatsCan and CIBC.

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