By Promit Mukherjee

OTTAWA (Reuters) -Canada’s trade surplus in January exceeded expectations by a wide margin posting a 32-month record as fears of tariffs from the U.S. pushed exports of cars and energy products higher, especially south of its border, data showed on Thursday.

The trade surplus rose to C$3.97 billion ($2.78 billion), more than double the upwardly revised C$1.69 billion seen in December, Statistics Canada said, including a record surplus with top trading partner the United States.

U.S. President Donald Trump slapped a 25% tariff on almost all Canadian imports and after retaliation by Prime Minister Justin Trudeau, he has threatened to stack up more tariffs on them.

On Thursday, Trump agreed to suspend the tariffs for a month provided the products imported into the U.S. comply with the terms of the Canada-U.S.- Mexico free trade agreement.

Canada also rolled back a plan to slap a second round of retaliatory tariffs on the U.S. Its 25% tariff on C$30 billion of goods imported from the U.S. are still in place.

Analysts polled by Reuters had forecast Canada’s trade surplus to be at C$1.28 billion and have said that trade balances would benefit from companies front-loading orders in January.

"This uncertainty is creating major swings in the data, and we are just getting started," Andrew DiCapua, Principal Economist, Canadian Chamber of Commerce.

Total exports increased 5.5% in January to a record of C$74.5 billion, following a 6% increase in December. A 1% decline in the value of the Canadian dollar to its U.S. counterpart in January also led to an increase in export value, it said.

In volume terms, total exports rose 4.5% in January, following an increase of 2.6% in December.

The jump in exports was led by an over 12% jump in motor vehicles and parts, followed by a 4.8% increase in exports of energy products, data showed.

The Canadian dollar was largely stable after the data with the local currency trading weaker by 0.18% to 1.4361 to the U.S. dollar, or 69.63 U.S. cents. Yields on the two-year government bond dropped by 1.1 basis points to 2.544%.

U.S. TRADE

Canada’s trade surplus with the U.S. clocked a record of C$14.4 billion in January, from C$12.3 billion in December. This was led by historically high exports of C$58.2 billion to the U.S. Imports from the United States increased 4.7%, Statscan said.

The trade surplus with the U.S. increased for the third month in a row.

Trump has often indicated that he is unhappy that his country imports more from Canada than it exports and analysts have said that tariffs are also a tool for Trump to reverse this deficit.

However, data shows that its deficit with Canada, which is its second biggest trading partner, is much smaller than its other two top trading partners - Mexico and China.

According to U.S. government data the deficit with Mexico is almost 2.5 times that of Canada, while it is just a fifth of what the U.S. has with China.

Stuart Bergman, chief economist with Export Development Canada said Canada’s surplus with the U.S. shrinks when services trade is taken into account. In services trade, Canada runs a deficit with the U.S.

Services imports for January were down 0.4% on a monthly basis led by a slump in travel services of 5.3%, mainly on lower spending by Canadians traveling to the US, he said.

"This is clear evidence that the current situation is impacting consumer choices," Bergman said.

($1 = 1.4279 Canadian dollars)