Trade & Tariff Update #49 - Tariff Durability Beyond Midterms, GDP Grows & More

Mixed Signals on Canada Trade Deal  

The outlook for a United States/Canada trade deal has been up and down.  Despite recent reports of building momentum for an agreement, Canadian Prime Minister Mark Carney seemed less optimistic last week.  After a summit with European officials, Carney said that he would be willing to wait until after President Trump leaves office to complete a deal “if that’s what it takes.”  While it’s too early to know whether this is a hard position or merely a negotiating tactic, tariffs have reportedly been negatively affecting Canada’s economy, and the recent tariff reductions on certain wood products might alleviate some tensions.  Perhaps marking a positive development, President Trump remarked to reporters yesterday that the United States has “the concept of a very good deal with Canada,” and that both sides are “very close” to reaching a deal.   

Tariff Durability Beyond Midterms 

Another data point came in last week, suggesting that regardless of the midterm election outcomes, the Trump Administration’s tariff regime will likely remain in place.  Even if Democrats win one chamber and hold symbolic votes to repeal certain tariffs, it seems that neither party would reach a veto-proof majority.  Moreover, although Congress could modify the Section 122 and 338 tariffs, the Section 301 regime will likely remain in place, with the pending excess-capacity Section 301 investigation possibly in place before any legislation superseding the 122 and 338 tariffs is enacted. 

Inflation Increases 

Inflation increased modestly in September after decreasing in August, according to new data released last Thursday by the Bureau of Economic Analysis (BEA).  The personal consumption expenditures (PCE) price index, the Federal Reserve’s preferred inflation metric, climbed by 0.5 percent last month, up 3.6 percent from September 2025.   

The consumer price index, the Bureau of Labor Statistics’ inflation measure, rose .6 percent in September, up 3.7 percent from September a year ago. The Federal Reserve Bank of Cleveland projected PCE inflation for September at 0.5 percent month over month and at 3.6 percent compared to September 2025. 

GDP Grows 

Stronger-than-expected economic growth in the third quarter can be attributed to vigorous business investment and resilient consumer spending, according to one source.  The gross domestic product, the value of all goods and services produced, increased by an adjusted 3.4 percent annually, the Commerce Department said Thursday. 

Also rising was government spending, helping to accelerate the second quarter’s 2.2 percent growth rate. Reflected in the increase is an accounting effect from lower oil sales from the Strategic Petroleum Reserve, which had no direct impact on overall GDP. Imports, which are subtracted from GDP, climbed in the third quarter.  A 3.1 percent increase in GDP had been predicted by economists. 

Consumer Confidence Improves 

While probably too late to benefit GOP members at the polls, consumer confidence jumped unexpectedly in October, as current conditions and expectations were viewed more favorably.  The Conference Board’s consumer confidence index rose sharply to 91.7 in October, up 7.5 points from September’s 84.2 level. Economists had predicted confidence falling to 81.

Consumers see current business conditions as improved, with a larger share reporting conditions as good rather than bad. The percentage of consumers viewing jobs as plentiful rose from 24.3 to 26.7 percent, while those viewing jobs as hard to get stayed unchanged at 21.4 percent.

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