President Trump is ramping up his tariff campaign once again, threatening dramatically higher duties on Canadian autos while preparing new tariffs on Chinese goods as his administration rebuilds a trade strategy struck down by the Supreme Court earlier this year.
Why it matters: The renewed trade offensive comes at a much more complicated moment for inflation. Price growth remains elevated, while the Iran war continues to threaten another oil shock, meaning tariffs could add another layer of inflationary pressure and potentially keep interest rates higher.
- Trump announced Monday that tariffs on Canadian-made cars, trucks, automotive parts and steel will increase to 50% beginning January 1, 2027.
- “Canada has been ripping off the United States of America for years,” Trump wrote on social media, pointing to Canadian agricultural tariffs and what he described as a $60 billion trade deficit between the countries.
Canada isn’t alone. Bloomberg reported that the U.S. is preparing to impose a 7.5% tariff on Chinese goods over allegations of excess manufacturing capacity ahead of a planned meeting between Trump and Chinese President Xi Jinping next month.
- Reporters Lucille Liu and Jenny Leonard wrote that the move would bring Trump’s second-term tariffs on China back to roughly 20%, a level Beijing has previously said is consistent with its trade truce with Washington.
Tariffs are Back: The administration is also laying the legal groundwork for a broader tariff regime. After the Supreme Court struck down Trump’s previous tariffs on China and dozens of other economies in February, the White House turned to alternative authorities.
- In March, the administration opened investigations into more than a dozen major trading partners under Section 301 of the Trade Act of 1974 over concerns about excess industrial capacity. The administration has also used investigations into forced labor as another avenue for imposing more durable global tariffs.
Impact on Mortgage Rates: The timing could make this tariff campaign particularly important for rates. During Trump’s previous trade war, inflation was trending lower from multi-decade highs. This time, inflation remains elevated and the Iran war continues to threaten energy supplies. If tariffs push the cost of imported goods higher while another oil shock raises transportation and energy costs, bond investors could demand higher yields to compensate for persistent inflation.
The bottom line: Trump’s tariff push is back, but the economic backdrop has changed. With inflation already elevated and energy markets vulnerable, another global trade war could have a much bigger impact on Treasury yields and mortgage rates.