Post-Election Trade Policy to Heighten Supply Costs
Business owners should prepare for potential 50% tariffs on Canadian auto parts and rising inflation in 2027.
Updated on Oct. 29, 2026 in International Trade
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Following the November 3, 2026, midterm elections, businesses face potential shifts in trade policy as executive actions become a primary lever for economic regulation. Sectors reliant on cross-border supply chains, particularly in automotive and construction, are bracing for volatility following a series of investigations and threatened tariff increases.
Why it matters
Trade uncertainty creates immediate cost pressures as insurance modeling predicts inflation spikes significantly above the 2.8% baseline for essential inputs. Companies must now navigate a landscape where legislative gridlock likely forces the administration to use executive trade measures, potentially impacting insolvency rates.
Aon models show potential tariff-driven inflation at 5.7% for auto physical damage and 4% for property construction, far exceeding the 2.8% baseline. Meanwhile, Allianz Trade forecasts a 12% jump in US business insolvencies for 2026, followed by a 4% increase in 2027.
The players
President Donald Trump
As the current President of the United States, he utilizes executive authority to implement trade measures amid legislative gridlock.
Aon
A global professional services firm that provides risk, retirement, and health solutions, including tariff inflation modeling.
Allianz Trade
A global trade credit insurance company that monitors and forecasts corporate insolvency and economic trends.
USTR
The Office of the United States Trade Representative is responsible for conducting trade investigations and negotiating agreements.
The details
The administration continues to leverage Section 301 investigations—initiated in March 2026—to address manufacturing capacity issues across major trading partners, including China, the European Union, and Mexico. For operators, this creates a dual risk: direct tariff costs, such as the 50% threat on Canadian auto parts, and indirect insurance rate hikes. Insurers are currently adjusting premiums based on commercial client exposure to these imported goods, adding another layer of fixed-cost volatility to supply chain procurement.
Timeline
March 2026: USTR launched Section 301 investigations.
August 2026: US-Canada trade negotiations collapsed.
October 26, 2026: US and Canada officials worked on a tariff deal.
November 3, 2026: Midterm elections take place.
January 1, 2027: Potential 50% tariff increase on Canadian auto parts.
Market Landscape
The current investigations follow the pattern established by Section 301 of the Trade Act of 1974, which allows for unilateral trade responses. This strategy marks a shift toward aggressive executive-led trade intervention rather than relying on traditional legislative processes.
Operators must stress-test cash flow against the projected 5.7% inflation rate for imported auto and construction components. Consult your accountant to review your supply chain's exposure to Canadian imports ahead of potential January 2027 tariff changes.
The takeaway
The rise in modeled business insolvencies suggests that supply chain margins are increasingly vulnerable to sudden trade policy shifts. Operators should track the 12% projected rise in insolvencies as a metric for industry stability and verify whether their primary suppliers carry exposure to Canadian automotive parts.
What happens next
A potential agreement regarding steel and auto tariffs between the US and Canada may be reached before the November 3, 2026 midterm elections. Operators should monitor for updates on the proposed 50% tariff on Canadian automotive parts scheduled for potential implementation on January 1, 2027.
Further reading
For more on managing global supply chain risks, see our International Trade section.
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Do you expect new trade tariffs to increase the prices you pay for goods in 2027?
