US President Donald Trump issued an order to exempt a group of Canadian agricultural and forest products from customs duties amounting to 50 percent, in a move that may ease the burdens on companies and farmers in the state of Maine, in conjunction with Republican Senator Susan Collins running a close electoral race to retain her seat in the Senate.
The decision comes days before the midterm elections scheduled for November 3, and at a time when Republicans are seeking to maintain their majority in both chambers of Congress.
The customs duties imposed by Trump on Canada sparked trade tension with its northern neighbor, and also harmed American companies that rely on Canadian imports, especially in the border states. Collins had called on the White House to ease duties imposed on products that affect companies and farmers in her state, which shares a border with Canada.
Exemptions include wood and paper products
The White House announced that the executive order exempts plywood, certain paper products, types of machinery and refrigeration equipment, packaging boxes and containers, as well as fresh and dried seaweed. The amendments are scheduled to take effect on October 30, four days before the elections.
On the other hand, Trump added other Canadian products to the list of goods subject to the 50 percent tariffs, to offset the impact of the new exemptions. The list included carpets, paints, waste, shampoo, cocoa powder, wooden coffins, ice cream sticks, air conditioners, freezers, archery equipment and rowing boats.
Collins said that easing fees would help Maine producers of blueberries, potatoes, apples and seaweed, noting that these activities represent an important part of the state's economy and support rural and coastal communities.
She added that many farmers and producers depend on specialized equipment, packaging materials and other products from Canada, either because there are no American alternatives available for them, or because replacing them involves high costs.
Different positions on fees
Collins is in a close race with Democrat Troy Jackson, who is seeking to unseat her, according to exit polls. The two candidates exchanged criticism over customs duties during a debate that took place on October 6.
Jackson criticized the decision, saying that Trump's trade wars had made life more difficult and expensive for Maine residents, and accused Collins of contributing to the crisis and then trying to present herself as having the credit for alleviating it.
In August, Trump imposed 50 percent tariffs on Canadian imports worth $20 billion, after the collapse of talks between the two countries. Canada responded in September by imposing duties ranging from 15 to 50 percent on US goods of the same value.
Since then, the two countries have remained in a trade standoff, although Trump confirmed on Friday that Canada was working to reach an agreement.
Between voter pressure and Trump's support
Female and male Republican Party candidates in the northern states bordering Canada, including Maine and Michigan, face a difficult electoral equation. They seek to maintain the support of Trump's conservative base, while appealing to independent voters hurt by the tariffs.
White House spokesman Matthew Middleton said that Trump continues to address what he described as Canada's discriminatory treatment of American trade, adding that the new measures reset the scope of the duties that were previously announced.
For his part, Dominique LeBlanc, the Canadian minister responsible for trade with the United States, said that Ottawa is evaluating the latest amendments, stressing his country’s readiness to work constructively and in good faith for a more mutually beneficial trade relationship, while respecting Canadian interests.
The economies of Maine and Michigan overlap with Canada's in multiple sectors, from auto parts and lumber to fruit-picking equipment. Republicans may need to win close races in both states to retain their narrow majority in the Senate.
Democratic Senator Ron Wyden, the most prominent Democrat on the Senate Finance Committee, described the move as a desperate last-minute attempt to save Collins' political future, considering that it reflects voters' rejection of Trump's tariff policies.
In Michigan, Republican Senate candidate Mike Rogers praised the imposition of fees on Canadian waste, despite his previous call for ending the trade war with Canada.
The repercussions of the fees extend to other states
The political considerations associated with tariffs were not limited to Maine and Michigan; In September, Trump threatened to prevent the Canadian aircraft manufacturer Bombardier from entering the American market, which raised concerns in the state of Kansas, where the company employs about 1,500 people in the city of Wichita.
But Trump backed down from the threat this week, following calls made by lawmakers from Kansas, including Republican Senator Roger Marshall, who is also in a tough race to retain his seat.
These developments highlight the overlap between trade policy and electoral calculations in states whose economies are linked to Canada, where tariffs have become an issue that affects production costs, corporate interests, and Republicans’ chances of maintaining their majority in Congress.
France avoided a new downgrade of its credit rating from Moody's, after the agency maintained its rating at Aa3 while maintaining a "negative" outlook, in a move that temporarily relieves pressure on the French government, which is facing escalating social unrest and difficulties in controlling public financial conditions. The decision comes at a time when investors are increasingly concerned about the budget deficit, rising borrowing costs, and the possibility of a worsening political crisis as the presidential elections scheduled for next year approach.
Bond markets were expecting a downgrade in the rating, which would put Moody's in the footsteps of Standard & Poor's and Fitch, which had already downgraded France, in light of the faltering efforts to control public spending and the continued political paralysis that followed the early legislative elections in 2024, which resulted in a divided parliament.
Moody's said that it had completed its periodic review of the rating and maintained it at AA3, a level that has carried a negative outlook since October of last year.
The new budget is at the core of Moody’s decision
The French Ministry of Finance considered that the decision to maintain the classification reflects “the credibility of the budget presented by the government within the draft 2027 budget,” which aims to return public finances to the path of recovery.
But the government faces difficulties in passing the project within Parliament, as opposition parties may refuse to compromise on its provisions, or seek to topple the government through a vote of no confidence.
Moody's said that France's rating assumes the approval of a budget for 2027 that limits the deficit, in addition to a relative decline in financing costs and social tensions in the coming months.
The budget aims to reduce the budget deficit to 5 percent of GDP in 2027, compared to 5.4 percent during the current year. However, the House of Representatives canceled some key saving measures, while the opposition parties showed limited willingness to compromise. It sought to cancel some of the proposed cuts and add new expenditures.
Borrowing costs rise to record levels
France faces higher borrowing costs than countries with lower credit ratings, such as Italy, as investors worry about the widening budget deficit, which is one of the largest in the euro zone, as well as the political risks associated with the upcoming presidential elections.
The risk premium on French government bonds compared to German bonds, which are considered a safe haven, rose to its highest levels in 15 years on Thursday, while the 10-year French bond yield rose to 5.14 percent, its highest level since July 2002.
Social protests have made it more difficult to pass spending cuts, after demonstrations linked to lack of school funding and high costs of living turned into riots and looting over the past weekend. The government refuses to increase school funding or raise the minimum wage, while new protests are expected on Saturday.
Presidential elections increase uncertainty
Moody's had indicated earlier in October that the French government's ability to overcome divisions within Parliament would be the decisive factor in its next decision regarding the credit rating.
Rushab Amin, portfolio manager at Allspring Global Investments, said that investors prefer to wait to see how the political scene develops during the next six months leading up to the elections, considering that these developments will have a greater impact on the difference between French and German bond yields.
Opinion polls indicate the possibility of the far right winning the presidential elections scheduled for April 18 and May 2 next year, which increases the state of uncertainty about French financial and economic policy.
Risk of approaching minimum investment grade
Mike Bell, head of markets strategy at RBC Blue Bay Asset Management, warned that pressures on French debt could intensify after the presidential election if Moody's, Standard & Poor's and Fitch downgraded France's rating to BBB, which is just one level higher than the non-investment grade rating, known as "junk bonds."
This scenario would push some investors, who are subject to minimum credit rating limits under investment rules, to sell their holdings of French bonds, which could increase pressure on the market and raise borrowing costs.
Thus, Moody's decision provides a temporary respite for France, but it does not eliminate the risks surrounding its public finances. The government's ability to pass the budget, reduce the deficit, and contain political unrest will remain decisive factors in determining the direction of the credit rating and financing costs during the next stage.
The decline in US Treasury bond yields and corporate business results, which exceeded expectations, enhanced investors' interest in global stocks, as funds continued to attract cash flows for the fifth week in a row, with a net amount of $28.16 billion during the week ending October 21, compared to $19.88 billion in the previous week. However, this momentum did not dispel fears related to the rise in capital spending on artificial intelligence, after “META” plans to issue new shares raised investors’ concerns about the investment commitments of technology companies, at a time when global bond funds recorded inflows for the fifth week as well, while money market funds returned to attracting liquidity after a sharp wave of withdrawals.
The yield on 10-year US Treasury bonds fell by about 15 basis points during the week, before falling below the 5 percent level this week, a level that is widely followed in the markets, according to Reuters.
Positive corporate results have strengthened investor appetite. The results of about 73 percent of the companies listed in the MSCI Global All-Country Index, which have announced their results so far, exceeded the average expectations of analysts, according to LSEG data.
But the MSCI global index fell by 1.31 percent on Thursday, after Meta announced strong results on Wednesday, coinciding with its disclosure of plans to issue non-voting shares, which revived concerns about its growing capital commitments.
Asia attracts major inflows
Geographically, Asian equity funds attracted $11.53 billion, the largest weekly inflow since at least December 2022. European funds also attracted $9.14 billion, and American funds attracted $5.07 billion.
In the United States, net flows to equity funds fell to $5.07 billion during the week ending October 21, a decline of nearly 62 percent, compared to $13.37 billion in the previous week. This came despite the improvement in investor appetite due to the decline in bond yields and the strength of corporate results, while fears related to artificial intelligence investments limited demand for stocks.
The yield on 10-year US Treasury bonds decreased by about 38 basis points compared to its peak recorded in early October, when it reached 5.3645 percent, which is its highest level in 24 and a half years. Also, the results of about 82 percent of the Standard & Poor's 500 index companies that have announced their results so far have exceeded analysts' average expectations, according to LSEG data.
However, the Nasdaq Composite Index, which is dominated by technology stocks, fell by 2.6 percent on Thursday, after Meta’s plans to issue new shares raised concerns about rising capital commitments for sector companies.
The data showed that investors pumped $8.63 billion into major US stock funds, and $1.92 billion into medium-sized company funds, while they withdrew $4.24 billion from small-cap funds.
Global technology funds
At the sector level, global technology funds attracted $5.05 billion, reversing trend after recording net withdrawals of $4.77 billion in the previous week. Healthcare funds also took $1.83 billion out of inflows, while consumer luxury goods funds saw $1.29 billion exit.
In the United States, sector funds recorded inflows of $1.8 billion after two consecutive weeks of withdrawals, supported mainly by the entry of $1.18 billion into metals and mining funds. Technology and industrial funds also attracted $429 million and $269 million, respectively.
Bond market
In the bond market, global bond funds continued to attract investments for the fifth week in a row, with net inflows of $9.44 billion. Swiss franc-denominated funds attracted $6.8 billion, the largest weekly inflow to them since at least November 2024. Short-term bond funds also attracted $2.78 billion, while high-yield bond funds recorded withdrawals worth $1.68 billion, and government bond funds recorded withdrawals worth $550 million.
In contrast, US bond funds recorded net weekly withdrawals of $969 million, ending a series of inflows that lasted 26 weeks. Investors withdrew $3.3 billion from government bond funds and long-term Treasury bonds, while they pumped $1.76 billion into government funds and short- and medium-term Treasury funds, and $1.56 billion into municipal bond funds.
Money market funds returned to attracting investments, recording net weekly inflows of $15.86 billion globally and $14.82 billion in the United States, after witnessing large withdrawals in the previous week amounting to $47.51 billion globally and about $45.93 billion in the United States.
In commodity markets, gold and other precious metals funds attracted $1.29 billion, recording net purchases for the fifth week over the past six weeks, while energy funds attracted $41.5 million.
As for emerging market funds, the data, which included 29,174 funds, showed that investors pumped $6.28 billion into stock funds, the largest weekly net purchase since August 5, while they withdrew $48.72 million from bond funds.
