U.S. Inflation Cools, Stocks Rally as Trump Imposes New Tariffs on Canada
A lower-than-anticipated U.S. inflation report for September fueled market optimism, driving stock gains while President Trump announced additional tariffs on Canadian goods.
The consumer price index for September rose 0.3% for the month, bringing the annual rate to 3%, both figures slightly below economists’ expectations of 0.4% and 3.1% respectively, according to a Dow Jones survey. This easing of inflationary pressure has increased expectations for potential interest rate cuts by the Federal Reserve at its meeting later this week and in December – a move that could stimulate economic growth. Major U.S. indexes climbed Friday, with the Dow Jones Industrial Average closing above 47,000 for the first time, and posting a weekly gain of approximately 2% alongside the S&P 500 and Nasdaq Composite.
Despite the positive economic news, President Trump yesterday imposed a 10% tariff on Canadian imports, escalating general duties to 45%, in response to an advertisement featuring Ronald Reagan criticizing his tariff policies. Economists warn that such tariffs could ultimately lead to higher consumer prices, potentially offsetting the benefits of slowing inflation; you can learn more about the effects of tariffs from the Council on Foreign Relations. The move comes as top U.S. and Chinese officials met Sunday at the ASEAN Summit, resulting in what U.S. Treasury Secretary Scott Bessent described as “a very successful framework” for a potential meeting between Trump and Xi Jinping.
The strong earnings season has also contributed to market gains, with 87% of companies reporting results so far exceeding Wall Street expectations, significantly higher than the typical 67% beat rate, according to LSEG. A packed week lies ahead, including earnings reports from most of the “Magnificent Seven” tech companies, the Federal Reserve meeting, and a potential first in-person meeting between Trump and Xi Jinping since January. The ongoing U.S. government shutdown continues to limit the availability of key economic data, such as the jobs report, creating some uncertainty in the economic outlook – see previous coverage of the shutdown.
White House press secretary Karoline Leavitt stated last week that the meeting between Trump and Xi Jinping is scheduled for October 30 on the sidelines of the Asia-Pacific Economic Cooperation Summit, though a trade deal remains elusive.
