Election season is doing what trade negotiators couldn’t.

The Wall Street Journal reports the US is preparing to lift 50% tariffs on some Canadian agricultural and forestry products, with a proclamation possibly coming as soon as today. The motivation is political: Maine Sen. Susan Collins has been lobbying for relief and is in a dead heat with Democrat Troy Jackson with less than two weeks to go until Election Day.

Unfortunately, there is no real sign of a political thaw here as Trump could also raise other tariffs. USD/CAD is dow n18 pips to 1.3990 today and unmoved on this report.

The details:

• Scope and timing could still change, according to the WSJ’s sources
• The cuts may be offset by higher tariffs on other Canadian goods
• The White House says any announcement will come from the administration and calls the reports speculation
• USTR declined to comment

This would be the second adjustment to the 50% tariffs. Last month, Washington exempted road salt and cement and added other products to keep the affected total at about $20 billion, or roughly 5% of Canadian exports to the US. Collins took credit for that change on the campaign trail. Jackson’s reply in their debate was that Mainers “can’t eat road salt.” Food and lumber are a different matter.

The politics go well beyond Maine. In Michigan, GOP Senate nominee Mike Rogers is now running ads urging Trump to end the trade war with Canada after spending months backing it. In New Hampshire, John Sununu has also criticized the Canada tariffs.

For background, Trump imposed the 50% levies in late August after last-minute talks broke down. He used Section 338 of the Tariff Act of 1930, the Smoot-Hawley provision, which had never been used before. Canada retaliated, Trump responded with import bans on some Canadian products, and he has threatened to double tariffs on Canadian autos in January if there’s no deal. A New Jersey food importer filed suit this week arguing Section 338 goes beyond the administration’s authority.

Again, I don't see this as a thaw. It’s a swap and the dollar value covered stays around $20 billion and the headline effect for Canada is mostly reshuffling. At the same time, if he wanted real political gains for Republicans before the midterms, he could drop the tariffs altogether and make a deal.

This article was written by Adam Button at investinglive.com.

Source: Investing Live - News