Trade & Tariff Update #50 - Tariff Outlook Post Elections , Canada Trade Post Midterms & More

Canada Trade Post Midterms 

After a pullback on some Canadian wood tariffs during the election period in what seemed an effort to bolster Senator Susan Collins in Maine, the question of a trade deal with Canada remains post midterms.  President Trump and Administration officials have expressed optimism that a deal can be reached, and Canadian Prime Minister Mark Carney told reporters last Friday that his government would“welcome any moves to restore” free trade between the two countries.  Carney also remarked that he has not spoken with Democrats about any legislative plans to end the Canadian tariffs. 

Section 301 Duties 

More broadly, the tariff regime has stabilized, with the new Section 301 Forced Labor duties and trade deals replacing many of the Section 122 and 338 duties that are facing legal challenges.  Still pending is Section 301 Excess Capacity investigation that could impose more legally durable duties on China, Vietnam and other key trading partners. A summit between Chinese President Xi, Russian President Vladmir Putin and President Trump is planned later this month. 

China Extends Pause on Additional 24% Tariffs Until January 

On November 9, China announced it would continue the suspension of 24% tariffs on the United States until January, extending the September trade truce in effect between the two countries.  The extension will take effect on November 10.  China will also extend its special port fees on American ships until January 10.  Chinese President Xi Jinping and President Trump are expected to meet in China next week.   

Compliance Deadline Extended for Mail Shipments

U.S.  Customs and Border Enforcement announced it is extending the deadline to January 20, 2027 for compliance with the new requirement for shippers to meet new reporting requirements under the elimination of the de minimis exemption. The elimination of the exemption appears to be permanent, reducing the threat of stolen card designs from China. 

Tariff Outlook Post Elections  

Opposition to President Trump’s tariffs was a key element in the Democratic campaigns.  Campaign promises and Democratic wins aside, the critical question is whether any of it will lead to legislation either fundamentally restoring tariff authority to Congress or more limited symbolic bills.  There are three potential scenarios: 

Playing Big Ball: 

While the House and Senate Trade Review Act bills offered the potential for a comprehensive restoration of Congressional power over tariffs, neither has received strong co-sponsorship from current Democrats in Congress.  Any fundamental legislation likely would face a veto lacking sufficient support to overcome.  An early indicator of how strong the effort to curtail tariffs is depends on the Trade Review Acts or similar bills being introduced, strongly supported by cosponsors and the House Ways and Means/Senate Finance Committee chairs, and Republican engagement toward building a veto-proof majority. 

Playing Small Ball: 

Congress could move forward with more limited bills to overturn country-specific tariffs or modify Section 122 and 338 tariff authorities. (Those authorities had never been used and if supplanted by the new Section 301 duties, need never be used again. Such legislation would effectively fix the barn door after the horse has come home.)  Such efforts also risk a veto but might garner enough Republican support to succeed and check the box on Democratic promises to “defeat” Trump’s tariffs.  A key question is whether Congress advances any legislation to address the Section 301 tariff regime and the pending excess capacity investigation that could result in more legally durable duties on key countries including China and Vietnam.   

There are signs that this will be the approach out of the gates.  Last week the Wall Street Journal reported on a plan to reverse the Canadian tariffs.  This would fit the small ball definition for multiple reasons:  1) President Trump already reduced tariffs on many products in a vain effort to boost Maine Senator Susan Collins’ reelection bid; 2) a trade deal likely is close to fruition; and 3) most products remain exempt under the USMCA.  Any time spent on that without addressing the “301” pound gorilla in the room would be time wasted; however, passage would be assured, potentially with enough Republican support to override a veto and effectively fulfill the letter, if not the spirit, of campaign promises.

No Ball at All: 

Actually a variation of the first option, playing no ball at all would be to set up an ersatz effort to overturn tariffs on a broad basis without taking the actual steps necessary to pass it, and then blame the failure on President Trump.  The approach taken by outgoing Senate Majority Leader John Thune (R-SD) with the Save America Act is instructive: token efforts were made to pass the bill with no actual attempt to garner the necessary votes or harness public support to clear the 60-vote threshold.  In the new Democrat-controlled Senate, 67 may become the new 60 if the cloture threshold is abandoned.  Senate Leadership would then be allowed to pass a broad tariff repeal bill with no effort to really overcome a veto. This is not overly cynical considering that the Section 301 tariffs from President Trump’s first term survived two years of unified Democratic control under President Biden while most other Trump I elements were overturned.  

Significant union support for tariffs is generating internal pressure from key Democratic support groups to maintain them.  According to the Hill last week, the groundwork already is being laid for this approach; Democratic Arizona Representative Greg Stanton promised “one hell of a donnybrook over ending these tariffs.”  A fight seems assured, but whether Democrats will wage an actual policy fight or just a political one remains uncertain.  The challenges of blocking the Trump tariff agenda have been noted, and the early efforts of the new incoming Democratic majority on tariffs will be critical.  If Section 301 duties are included in the initial bill and if there is a genuine attempt to engage with Republican members to build a bi-partisan effort, success could be possible.  

 New Economic Data 

Canada PMI Falls: The S&P Global Canada manufacturing purchasing managers index contracted in October to 49.6.  This marked the third straight monthly decline and the first time in 2026 that it dropped below the 50 threshold between expansion and contraction, after falling to 51.5 in September. President Trump’s tariffs have impacted Canada’s economy, and as seen below, have not similarly affected the U.S. economy at a macro level. It remains to be seen whether Canadian Prime Minister Carney can hold out on completing a trade deal in hopes of securing relief from the new Congress.  

U.S. Manufacturing Rises: U.S.  manufacturing sector job openings climbed last month to their highest level since December 2023, according to data from the Bureau of Labor Statistics.  Vacant manufacturing positions in manufacturing increased in September to 584,000 from 530,000 in August. Durable goods openings climbed from 375,000 to 403,000, the second-highest peak since December 2023 (after 423,000 in July). 

U.S. Unemployment Falls: The Bureau of Labor Statistics (BLS) announced last Friday that 165,000 new jobs were added to the economy in October, up from 29,000 as originally reported in September. Pre-release analyst predictions had pointed to the addition of 65,000 jobs, a weak figure by historical standards.  The revisions upward in September to 60,000, and in August to 186,000 indicate that the previous two months' results were stronger than initially thought by 84,000. 

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