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.
The new figures follow a deficit of $1.1 billion the month before.
The Commerce Department said the trade gap dipped 0.1 percent to $43.7 billion.
Shortly afterwards, the US administration slapped tariffs on Canadian exports of softwood lumber and complained about Canada's dairy sector, helping to sink the Canadian dollar to 14-month lows. Exports of services increased $0.3 billion to $64.7 billion.More news: Serena and Federer light up the Met Gala
The total trade deficit on goods and services was -$43.7bn in March, down from -$43.8bn in the month before, according to the Department of Commerce.
Exports decreased 0.9 percent to $191 billion, the biggest drop since October, led by energy, autos and pharmaceuticals.
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.
The government reported last week that trade had a neutral impact on the 0.7 percent annualized rise in gross domestic product in the first quarter.More news: China launches its first domestically built aircraft carrier
However, automobile imports increased by $1.0bn. The trade gap with Mexico has surged almost 14% this year compared to the first quarter of 2016, hitting the highest level since November 2007.
President Donald Trump told Reuters that he was "psyched" to terminate the North American Free Trade Agreement with Canada and Mexico, but changed his mind after their leaders asked for it to be renegotiated instead.
Exports of goods decreased just over $2.0 billion to $126.3 billion in March, driven by a $0.6 billion decline in oil and $0.6 billion reduction in petroleum products.More news: Jets not exercising S Calvin Pryor's fifth-year option