Election-season politics appear to be accomplishing what trade negotiators could not. According to a Wall Street Journal report, the United States is preparing to lift 50% tariffs on certain Canadian agricultural and forestry products, with a proclamation possible as soon as today. The motivation is political: Maine Sen. Susan Collins, who has been lobbying for relief, is locked in a dead heat with Democrat Troy Jackson less than two weeks before Election Day.

The report still offers no real sign of a broader political thaw, as Trump could also raise other tariffs. USD/CAD slipped 18 pips to 1.3990 on the day and was unmoved by the news.

According to the Journal's sources:

• The scope and timing of the removals could still change.
• The tariff cuts may be offset by higher duties on other Canadian goods.
• The White House said any announcement would come from the administration and called the reports speculation.
• The Office of the US Trade Representative declined to comment.

It would be the second adjustment to the 50% tariffs. Last month, Washington exempted road salt and cement while adding other products, keeping the value of affected goods at about $20 billion, or roughly 5% of Canadian exports to the US. Collins took credit for that change on the campaign trail; Jackson replied during their debate that Mainers "can't eat road salt." Food and lumber are a different matter.

The politics extend well beyond Maine. In Michigan, Republican Senate nominee Mike Rogers is now running ads urging Trump to end the trade war with Canada after months of 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 down, invoking Section 338 of the Tariff Act of 1930 — the Smoot-Hawley provision, which had never been used before. The Depression-era statute allows duties of up to 50% on goods from countries found to discriminate against US commerce, a ceiling that matches the level applied here. 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 is no deal. This week, a New Jersey food importer filed suit arguing that Section 338 exceeds the administration's authority.

As outlined, the move amounts to a swap rather than a thaw: the dollar value of covered goods would stay near $20 billion, leaving the headline effect for Canada mostly a reshuffling. The items to watch from here: the proclamation's final wording, whether offsetting duties appear, and the January date Trump attached to threatened doubled tariffs on Canadian autos. At the same time, dropping the tariffs entirely and striking a deal could deliver greater political gains for Republicans ahead of the midterms.

Update: The announcement came from Collins, who cited several products, among them blueberries, potatoes, apples and seaweed — a list that maps directly onto Maine's farm and coastal industries.

Source: ForexLive