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Shares of Apple climbed to a record high Monday following a report showing strong demand for the company's iPhone 17
Key Takeaways

• Shares of a smartphone giant and AI server maker were among the S&P 500's top performers Monday, Oct. 20, 2025, while a large enterprise software firm continued to lose ground.
• Apple stock pushed higher following a report showing promising sales trends for the recently launched iPhone 17.
• Oracle shares continued to lose ground amid some concerns about the company's capital expenditure plans, and reliance on revenue from OpenAI.

A tech industry titan got a boost on Monday as the latest edition of its flagship product showed promising sales momentum. Meanwhile, a software giant's stock continued a slide that began last week amid questions about the company's ability to reach lofty growth targets.

Major U.S. equities indexes moved higher as the markets kicked off a new week of trading that will bring a wave of earnings reports as well as key inflation data. The S&P 500, Dow, and Nasdaq all added over 1%. See here for more reporting from Investopedia on the day's market moves.

Apple (AAPL) shares climbed nearly 4% to a closing record after a report revealed strong demand in the U.S. and China for the tech giant's new iPhone 17 series. According to Counterpoint Research, sales of the latest smartphone in the company's two key markets over the first 10 days of availability significantly outpaced those of the previous model.

Shares of server maker Super Micro Computer (SMCI) popped 5.5% as a technical analyst suggested that the stock could be forming a bullish cup and handle pattern. While Supermicro has drawn attention for massive opportunities related to AI infrastructure, the stock slumped in August after the company missed sales and profit forecasts in its latest earnings report.

Natural gas prices pushed higher as forecasts for colder weather over the coming weeks bolstered expectations for heating-related demand. Shares of Expand Energy (EXE), the largest natural gas producing company in the U.S., surged 6% to log the top performance in the S&P 500 Monday. Shares of natural gas peer EQT Corp. (EQT) gained close to 5%.

Reporting over the weekend highlighted intensifying regulatory scrutiny on adtech company AppLovin (APP) following reports earlier this month that the Securities and Exchange Commission has been investigating the tech firm's data-collection practices. AppLovin stock dropped 5.6% Monday to lead decliners in the benchmark index.

Oracle (ORCL) shares sank close to 5% Monday, extending losses last week after the enterprise software giant shared lofty targets at its Oracle AI World conference in Las Vegas. While the company is targeting robust AI-driven growth, several Wall Street analysts raised concerns about the company's capital expenditure plans, and reliance on revenue from OpenAI.

Shares of hard disk drive manufacturers Seagate Technology Holdings (STX) and Western Digital (WDC) fell 4.9% and 3.7%, respectively. Analysts at UBS recently lifted their price targets but maintained "neutral" ratings on the stocks of both data storage companies. The UBS team suggested that strong demand trends driven by the buildout of AI infrastructure into 2026 could give way to a potential cyclical downturn in 2027.

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Starbucks thinks AI may improve customers' experience with its app.
Key Takeaways

• Starbucks CEO Brian Niccol said he could imagine a day where the company's app is able to handle spoken order requests.
• The cafe chain is primarily using technology behind the scenes, while focusing on making stores social and inviting places to spend time, he said last week.

Getting your morning caffeine fix may soon be as simple as grumbling into your phone about your need for coffee.

AI could some day allow the Starbucks (SBUX) app to handle voice orders and do a better job of remembering customers' preferences, CEO Brian Niccol said recently. He said the cafe chain was eager to use artificial intelligence to "remove friction" in how customers interact with the coffee-and-beverage giant.

"You could just literally talk into your phone, like: 'Hey, I need my Starbucks order. I'll be there in 10 minutes,' and everything just seamlessly goes through the app," Niccol said on a Yahoo! Finance podcast recorded at a technology conference. "You show up at Starbucks, and your drink is ready."

Starbucks (SBUX) is mostly experimenting with AI and other new technologies behind the scenes as it tries to cultivate a warm, social vibe in cafes, Niccol said. The business is about a year into a turnaround effort, an attempt to jumpstart sluggish sales without offering widespread promotions. The Back to Starbucks campaign aims to serve customers at the counter within four minutes—and oit revitalize a stock that's down about 7% this year.

What This News Means for Investors

Starbucks' approach illustrates how hospitality businesses may be wary of using AI in customer-facing roles at present. Restaurants, such as Chipotle, that have touted their embrace of novel technology have generally focused on making back-of-house operations more efficient.

Order boards are an exception to keeping technology in the back of the house. The screens give customers an idea of where their order is in the system and when it will be ready, Niccol said.

Starbucks recently announced dozens of store closures for locations that aren't well-suited to its vision. The company is renovating other locations by adding rugs and drapes, Niccol said, and it's considering plants. Starbucks wants drive-thru and grab-and-go customers thinking that next time, they should "grab a seat," Niccol said.

Teens are an obvious target audience for the company, Niccol said. They already like Starbucks drinks and could use a space to engage in more old-fashioned socializing, Niccol said.

"Maybe I'm being a naive parent here a little bit, but I hope they put their phone down and connect with each other," he said on the podcast. "We're going to provide them that space."

Source: TradingView.com
Key Takeaways

• Bitcoin climbed back above the closely watched $110,000 level Monday as investors looked past the recent massive liquidation event in the crypto market and ongoing U.S.-China trade tensions. 
• The cryptocurrency has found buying interest near a confluence of support from the lower trendline of a three-month trading range and the rising 200-day moving average.
• Investors should watch major support levels on bitcoin's chart around $100,000 and $93,000, while also monitoring important resistance levels near $117,000 and $123,000.

Bitcoin (BTCUSD) climbed back above the closely watched $110,000 level Monday as investors looked past the recent massive liquidation event in the crypto market and ongoing U.S.-China trade tensions. 

The pioneer cryptocurrency received a boost after President Donald Trump seemed to soften his tone recently regarding trade disputes with China. The latest comments came a little over a week after the president imposed steep tariffs on all Chinese imports, which sparked a $19 billion wipeout of leveraged crypto bets.

Bitcoin was trading at $110,900 recently, after dropping below $104,000 on Friday. The digital currency has gained 18% since the start of the year, though is still down substantially from the record high of around $126,000 set two weeks ago. Looking ahead, the outlook for nterest rates, prospects for favorable crypto legislation, and upcoming trade developments between Washington and Beijing will likely drive crypto investor sentiment.

Below, we take a closer look at bitcoin’s chart and use technical analysis to identify major price levels worth watching out for.

Buying Interest Near Confluence of Support

Bitcoin has found buying interest near a confluence of support from the lower trendline of a three-month trading range and the rising 200-day moving average (MA).

While the move also coincided with the relative strength index rising from its recent floor, the indicator remains below its neutral threshold to signal lackluster price action. Looking ahead, investors should watch for trading volume to confirm whether the latest rebound has the potential to gain momentum or simply reflects short-term speculative activity.

Let’s point out major support and resistance levels on bitcoin’s chart that investors will likely be tracking.

Major Support Levels to Watch

A decisive breakdown below the trading range’s lower trendline could spark a decline to the psychological $100,000 level. This area would likely provide support near a trendline that connects a series of peaks and troughs on the chart extending back to last November’s high.

Bitcoin bulls’ failure to defend this major level opens the door for a deeper pullback toward $93,000. However, investors may step up to the plate in this location, looking to buy the cryptocurrency near a range of corresponding trading activity on the chart between November and April.

Important Resistance Levels to Monitor

If bitcoin’s price gains further upside traction this week, investors should initially monitor the $117,000 level, currently situated just above the respected 50-day MA. Tactical traders who bought around last week’s low may look to lock in profits in this area near the September peak and a closely aligned period of sideways drift on the chart during the second half of July.

Finally, a rally above this level could see the price climb to around $123,000. This are would likely attract significant attention near the July, August and October peaks, which mark the top of the cryptocurrency's current trading range.

The comments, opinions, and analyses expressed on Investopedia are for informational purposes only. Read our warranty and liability disclaimer for more info.

As of the date this article was written, the author does not own any of the above securities.

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Credit scores have improved for homebuyers applying for mortgages.
Key Takeaways

• New data shows that credit scores for home purchases hit their highest levels in six years, while credit scores for refinancing also hit mutli-year high levels. 
• The increase comes as mortgage rates were near their lowest levels in a year after remaining elevated for more than three years.
• Potential homebuyers and homeowners with lower credit scores could face more limited opportunities, experts said.

Credit scores for homebuyers in September reached their highest levels in at least six years as better-financed borrowers pounced on a drop in mortgage rates and lenders tightened their credit standards, new data showed.

The average credit score for mortgage purchases reached 736 in September, the highest level since real estate information firm Intercontinental Exchange (ICE) began tracking it. That’s well above the pre-pandemic levels of 2019, when the average credit score was about 10 points lower. A report from Realtor.com also similarly found that credit scores for mortgages were roughly 20 points above the national average.

That could mean that homebuyers with lower credit ratings are having a harder time getting a mortgage, experts said.

“This indicates a tightening of credit criteria in credit offerings, and that the majority of lenders are focusing on limiting risk,” said Phil Crescenzo Jr., vice president of the Southeast Division at Nation One Mortgage Corporation. “The impact to the lower credit score buyer may be limited offerings, a denial, or a higher interest rate.”

Why This Matters to Borrowers

Changes in the real estate market tend to reflect more broad U.S. economic trends. Rising credit scores for mortgage borrowers signal that homebuyers may have a harder time getting a home loan, even as rates have declined.

Decline in Mortgage Rates Brings in Better Scores

The uptick in mortgage loan credit scores comes as historically high borrowing costs have begun to decline, which experts said has helped increase demand in the housing market. 

Mortgage rates have been above 6% for more than three years, and even topped 7% at times. When rates fell below 6.3% in mid-September, they were at their lowest levels in nearly a year, providing an opportunity for better-financed buyers to jump into the market.

“While credit has been tight for some time now, the shift to higher credit scores in recent weeks is ... a function of who is stepping into the market to refinance or purchase a home as rates have improved,” said Danielle Hale, Realtor.com chief economist.

The average credit score for refinancing in September also surged to 722, up more than 30 points from a month ago, according to ICE data. The report found that homeowners with large mortgage loans jumped at the opportunity to refinance at lower rates.

“On the refinance side, it's typical for credit scores to rise when rates improve, as higher credit profile borrowers tend to have higher loan balances that require less rate incentive to break even on a refinance,” said Andy Walden, head of mortgage and housing market research at Intercontinental Exchange. “They may also be more financially savvy and may be watching rates more closely for refinance opportunities to arise.”

Credit Scores Are A Critical Part of Mortgage Lending

Mortgage lenders look at many factors when evaluating a borrower for a home loan. While credit scores are one of the key factors, lending agents also look at a borrower’s income and savings, debt levels, down payment amounts and the type of mortgage. Credit scores can also impact the mortgage rate for borrowers.

“Credit score is a very big factor in a final interest rate offering, but not the only factor. For buyers that are serious about their credit, they are going to see the best terms,” Crescenzo said. 

Data compiled by credit rating agency Experian showed that in September, borrowers who had a credit score of 740 could qualify for a 30-year mortgage rate of 6.63%. For borrowers with a score of 700, the rate shot up to 6.83%, while those with credit scores of 660 were offered a 7.04% mortgage rate.

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Tesla is slated to report third-quarter earnings after the closing bell on Wednesday.
Key Takeaways

• Options pricing suggests traders expect Tesla's stock could move about 7% in either direction in the days after its third-quarter earnings report on Wednesday's afternoon.
• Wall Street analysts are split on the outlook for Tesla's stock, but most believe the stock is currently overvalued.
• Investors will be looking for updates on lower-cost models, the rollout of robotaxi services, and progress on Optimus, Tesla's humanoid robot.

Tesla (TSLA) is scheduled to report third-quarter results after the bell on Wednesday, and some traders are betting the electric vehicle maker’s stock will jump to its highest level since last December on the results. 

Options pricing suggests traders expect Tesla stock could move about 7% in either direction by the end of this week. A move of that size off last week’s close would put shares at about $470, their second-highest closing price ever, or at about $409, their lowest price in over month. 

Tesla stock tends to be volatile after the company's earnings. Shares have moved an average of 9.6% the day after its four most recent reports. The stock soared more than 20% this time last year after Tesla topped analyst estimates and said it was on track to deliver a long-promised lower-cost vehicle. (Those models were finally announced earlier this month.) The reception to Tesla’s three reports since has been slightly more muted, but shares still tumbled more than 8% after its results came up short in July. 

Why This Matters To Investors

Earnings reports are often catalysts for large stock moves, with investors using forecasts or major corporate announcements to recalibrate their expectations, and anticipation of an abnormally large stock move could reflect either extreme optimism or pessimism about the upcoming results.

Tesla shares have been on a wild ride this year, starting 2025 near an all-time high amid optimism about CEO Elon Musk’s relationship with President Donald Trump. Shares were dragged down throughout the first quarter by President Trump’s tariffs on cars, aluminum, and steel, as well as a public backlash against Musk’s political efforts. They’ve rebounded in the months since Musk had a fallout with the president and vowed to spend more time focusing on Tesla and his other businesses. The stock is up nearly 10% since the start of the year, as of Monday afternoon. 

Tesla delivered more cars than Wall Street expected in the third quarter. Investors will be looking to Wednesday’s results for commentary on new low-cost models and how the recent expiration of electric vehicle tax credits will affect future sales. Updates on the rollouts of full-self driving software, robotaxis, and Tesla's humanoid robot Optimus, could also get substantial airtime on the post-earnings call Wednesday. 

Analysts are split on the outlook for Tesla stock over the next year. Three of the 13 analysts with current ratings tracked by Visible Alpha recommend selling the stock, while four assign it a “hold” rating. The remaining six call it a buy. Their average price target is about $363, about 17% below Friday's close.

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Shares of Beyond Meat jumped Monday as meme-stock traders piled in.
Key Takeaways

• A debt-swap deal left Beyond Meat's stock for dead—before the meme-stock crowd moved in.
• The shares jumped Monday, the latest indication of some traders' penchant for risk even as other pockets of Wall Street are growing more cautious.

Whatever the investor appetite for meat alternatives is, plenty have a hankering for risk. Shares of Beyond Meat (BYND) show it.

Retail investors are crowding into the name, bidding to revive the plant-based burger and sausage maker's beaten-down stock as a meme. Trading volumes in its shares and options started to surge last week, and are now at multiples of their 30-day averages, according to Yahoo Finance. Beyond's shares recently traded at just under $1, climbing more than 50% on Monday to reverse much of last week's drop. (At their post-IPO highs, they changed hands above $200 apiece.)

Penchant for high-risk/high-return plays is back among retail inverstors even as others are turning cautious. A Deutsche Bank research report last week said that the "momentum-chasing trade" has grown less popular with some of its clients. But those who crowdsource and evangelize stocks have lately tapped the beleaguered company as their meme darling once more.

"Today's reversal and high short-interest will put it back on meme traders' radars," said Tom Bruni, head of markets and retail investor insights at investing-focused social-media platform Stocktwits.

Why This Matters to INvestors

Concerns of stretched valuations and geopolitical uncertainty are driving some investors to pull back from riskier bets. But pockets of the retail set are still eager to jump into meme-stock action, showing that the appetite for risk isn't gone yet.

Beyond was sent "to the moon" alongside Opendoor (OPEN), Krispy Kreme (DNUT) and GoPro (GPRO) during the summer's meme stock revival. Another opportunity to send the shares flying came last week—just as the company seemed to have hit rock bottom.

The once-trendy company, struggling with falling demand for its food products, resorted to a debt-swap deal that could lead to the issuance of as many as 326 million shares of its common stock on top of its 76.1 million already outstanding, suggesting the possibility of massive dilution. That helped cut the stock by more than half, extending its year-to-date declines. That's right around the time when a thread called "MAKE $BYND GREAT AGAIN" showed up on a Reddit forum called "shortsqueeze."

While Wall Street has formalized the definition of blue-chip or deep-value stocks, meme stocks are harder to pin down. They tend to be companies with a low number of tradable shares, which make them susceptible to big swings, and high short-interest, an opportunity for retail to thumb their nose at the pros. Many, like Beyond, have consumer-friendly names that may resonate with everyday folks.

Beyond, however, may be lacking a ringmaster. Eric Jackson, who is to OpenDoor as Keith "Roaring Kitty" Gill was to GameStop (GME) and AMC (AMC), said he was being inundated with requests that he take a position in the stock.

"Is this some bot campaign?" he posted on social media over the weekend.

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A dispute over the federal budget has left investors, central bankers and business leaders flying blind without government-generated economic reports.
Key Takeaways

• The U.S. government shutdown entered its 20th day Monday, lengthening an ever-growing list of skipped economic reports.
• Investors are increasingly in the dark about everything from job creation to grain exports as statistical agencies stay shuttered.
  
• Economists see a growing risk that important economic data for October will never be produced.
  

As the government shutdown drags on, the list of skipped economic reports grows longer by the day, leaving the public and policymakers in a data fog.

The government shut down Oct. 1 after Republican and Democratic lawmakers on Capitol Hill couldn't come to a funding agreement. The shutdown closed much of the federal government, including the Bureau of Labor Statistics, the Census Bureau, and other statistical agencies.

Forecasters don't expect the impasse to be resolved any time soon, and betting markets are banking on the shutdown lasting for at least a couple more weeks, according to Polymarket.

At 20 days, the shutdown is the third-longest in history as of Monday. The longer shutdowns of 2018 (34 days) and 1995 (21 days) were considered "partial" shutdowns because certain departments remained open. The current shutdown is a "full" shutdown because Congress has not passed funding resolutions for any departments, although it is continuing to carry out certain critical functions including the military operations and Social Security payments.

What This Means For The Economy

The longer investors and leaders go without key economic data, the greater the risk of making mistakes based on outdated or imperfect information.

Here are the reports that were supposed to be published in October but were skipped because of the shutdown. The reports were at least delayed, with economists seeing a growing risk that October's data will be skipped entirely if the government does not reopen soon.

Data Dark AgeDateReportStatistical AgencyOct. 1Construction SpendingCensus BureauOct. 1Grain CrushingsDepartment of AgricultureOct. 1Fats and OilsDepartment of AgricultureOct. 2 Motor Vehicle SalesBureau of Economic AnalysisOct. 2Export SalesDepartment of AgricultureOct. 2Weekly Jobless ClaimsDepartment of LaborOct. 2Factory OrdersCensus BureauOct. 3Employment SituationBureau of Labor StatisticsOct. 6Crop ProgressDepartment of AgricultureOct. 7International Trade in Goods and ServicesBureau of Economic AnalysisOct. 8Business FormationCensus BureauOct. 9Weekly Jobless ClaimsDepartment of LaborOct. 9Export SalesDepartment of AgricultureOct. 9Wholesale Sales and Inventories (Preliminary)Census BureauOct. 9Supply/Demand (agricultural products)Department of AgricultureOct. 9Crop ProductionDepartment of AgricultureOct. 14Crop ProgressDepartment of AgricultureOct. 15Real EarningsBureau of Labor StatisticsOct. 16Weekly Jobless ClaimsDepartment of LaborOct. 16Producer Price IndexBureau of Labor StatisticsOct. 16Retail SalesCensus BureauOct. 17Export SalesDepartment of AgricultureOct. 17Import and Export PricesBureau of Labor StatisticsOct. 17Housing StartsCensus BureauOct. 17Industrial ProductionFederal ReserveOct. 17Treasury International CapitalTreasury DepartmentOct. 20Crop ProgressDepartment of Agriculture

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Steelmaker Cleveland-Cliffs said two of its mines look promising for producing rare earths
Key Takeaways

• Cleveland-Cliffs shares rocketed higher Monday afternoon after the steelmaker showed interested in mining rare earths, saying that two of its sites show promise.
• The steelmaker also reported a narrower-than-anticipated quarterly loss.

Shares of Cleveland-Cliffs (CLF) popped 20% Monday afternoon after it shared some news along with its third-quarter earnings: The steelmaker said it wants to get into the rare earths mining business.

CEO Lourenco Goncalves said “the renewed importance of rare earths has driven us to re-focus on this potential opportunity at our upstream mining assets.” He added that after looking at its mines, the company believes sites in Michigan and Minnesota show the most promise.

Goncalves said that if the company is successful in producing rare earths, “it would align Cleveland-Cliffs with the broader national strategy for critical material independence, similar to what we achieved in steel.”

Most of the world's rare earths are produced in China, and American companies that produce them have seen their shares soar recently as the key minerals used in a wide range of high-tech products from electric vehicles to smartphones have become a major source of contention in U.S.-China trade tensions. Shares of other companies in the sector were also higher in recent trading, as President Trump met with Australia Prime Minister Anthony Albanese to sign an agreement on rare earths.

Why This News Is Significant

Cleveland-Cliffs' foray into rare earths comes after China moved to curb exports, and as the Trump administration looks to reduce reliance on China for the minerals.

Along with the rare earths news, Cleveland-Cliffs reported a narrower-than-expected loss for the third quarter. Its adjusted loss of $0.45 per share was slightly better than what analysts surveyed by Visible Alpha were looking for. Revenue was up 3.6% to $4.73 billion, below forecasts.

Goncalves said the performance “marked a clear sign of demand recovery for automotive-grade steel made in the USA, and that is a direct consequence of the new trade environment implemented and enforced by the Trump Administration.”

Cleveland-Cliffs also lowered its estimate of full-year capital expenditures to $525 million from the previous outlook of $600 million, and selling, general & administrative (SG&A) costs by $25 million to $550 million. 

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Shares of Google parent Alphabet have outperformed the S&P 500 and the Magnificent 7 this year.
Key Takeaways

• Analysts at Oppenheimer updated their targets on shares of Alphabet and Meta this weekend, saying they prefer the former to the latter.
• They cited what they saw as a friendlier valuation on Alphabet's shares, as well as more conservative Street estimates.

You don't necessarily have to choose between the stocks of two Big Tech giants—but if you must, Oppenheimer has a pick for you.

Shares of both Google parent Alphabet (GOOG, GOOGL) and Meta Platforms (META), owner of Facebook and Instagram, have been strong performers this year, outpacing the Roundhill Magnificent Seven ETF (MAGS) and the S&P 500.

Still, Oppenheimer's analysts prefer the former's shares to the latter's. On Sunday, they put a $300 price tag on Alphabet, about 18% above Friday's close and the highest on Wall Street, and an $825 target on Meta, 15% higher than last week's finish and below Visible Alpha's analyst average. The Oppenheimer analysts cited what they considered "more conservative" Street estimates on Alphabet, along with a lower valuation on the shares.

Why This Matters to Investors

While the Magnificent Seven group of big tech stocks has outpaced the S&P 500 this year, under the hood there are signs that it might make sense to pick and choose carefully among them. One example: Three of the stocks have underperformed the S&P 500 this year.

"While we are positive on the long-term benefits from Meta's push into AI and proven ability to outgrow peers," they wrote, "we are more bullish on [Alphabet] near term, given more conservative estimates and lower valuation."

While the Magnificent 7 is running ahead of the S&P 500 this year, it's not surprising that investors might be looking to pick and choose among the group these days: Three of the seven stocks have underperformed the benchmark index year-to-date.

More stocks outside the group are lifting the index than in recent years, Capital Group wrote last week, a reference to what's known as market breadth, marking "a healthy move away from the extreme concentration that raised concerns about risks to investor portfolios."

"Rising valuations among companies in the index and more clarity on tariffs and interest rate cuts could help lift the U.S. equities market, which has trailed those in Europe and elsewhere," Capital Group wrote.

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Renegotiation talks over the U.S.-Mexico-Canada trade agreement are coming up, which could lead to new tariffs or other trade restrictions between the North American neighbors.
Key Takeaways

• While President Trump has already laid out some tariffs on Canada and Mexico, upcoming negotiations on a major trade deal could lead to additional tariffs.
• The process of renewing the U.S.-Mexico-Canada Agreement recently started, coming ahead of the July 2026 deadline to review the comprehensive trade agreement.
• Negotiations could center on a range of issues, including automobile manufacturing, as well as non-trade issues like intellectual property rights and agricultural supply management.

President Donald Trump is about to get another chance to massively shape the U.S.'s trade policies.

It's been six months since Trump upended years of U.S. trade policy with his "Liberation Day" tariffs. Now, the U.S., Mexico and Canada are about to review a major trade agreement Trump secured in his first term. This time, the negotiations over the U.S.-Mexico-Canada Agreement (USMCA) could focus on more than tariffs, as trade barriers, migration, drug trafficking and continental defense will all be part of the talks. 

“How the three nations navigate this moment will shape the region’s economic future for decades,” wrote Center for Strategic & International Studies (CSIS) analysts Diego Marroquín Bitar, Christopher Hernandez-Roy, and Earl Anthony Wayne.

Why This Matters to You

Talks about the comprehensive free trade agreement between the U.S., Canada and Mexico could open the door to more tariffs or other trade restrictions that could impact the prices consumers pay for goods from America’s closest trading partners.

Negotiations Could Be the Next Front on Tariffs

Mexico is the U.S.'s largest trading partner, followed closely by Canada, Census Bureau data showed. The two countries provide almost 30% of total U.S. trade, with third-place China accounting for less than 8%. 

While the U.S. has applied additional tariffs on some goods from Canada and Mexico, a broad swath of products that meet USMCA guidelines were exempt from the new import taxes. But that could change if the negotiations alter those guidelines, said Georgetown University government and business professor Marc Busch.

“Then we're talking a whole lot of tariffs,” Busch said.

High Stakes Review Process Begins

The process for renewing the USMCA is already getting underway, including the recent move by the U.S. Trade Representative to get public feedback on its impact on American businesses.

The agreement states that all three nations must review the pact by July 2026. If the parties don’t come to terms, it could lead to an end to a trade deal that was supposed to last 16 years, and have far-reaching impacts.

“The stakes are high,” CSIS wrote. “The USMCA remains the foundation of North America’s economic strength and a key counterweight to China’s global influence.”

While the trade agreement could change tariff levels, it’s also likely to address some of the many trade barriers that Trump's administration has identified. 

For instance, the U.S. said Canada’s supply-management system for agricultural products limited the ability of American farmers to sell there. It said that Mexico has widely flouted intellectual property protections by allowing counterfeit goods and media to proliferate, while also favoring the country’s state-owned energy companies.

“Since returning to office, the president has expressed concern that Canada and Mexico have taken unfair advantage of the USMCA and U.S. free market access and suggested that the agreement needed to be renegotiated,” legal firm Brownstein wrote in a note to clients.

USMCA Auto Rules Could Impact Car Prices 

One area where negotiations could lead to higher tariff costs is automobiles, where American negotiators will likely push for stricter “rules of origin” requirements, which means more parts of the car would have to be made either in the U.S. or North America.

“The supply chain complexity is astounding when it comes to auto parts. You're going to look at pieces of the car that are crossing both borders upward of seven to eight times before final assembly,” Busch said. “Of course, it'll translate to higher prices for consumers.”

The Trump administration is also expected to make drug trade enforcement and migration a key part of the talks with Mexico, while it’s likely to press Canada to take a larger share of defense spending for continental security. Leaders of both countries have stated they would work to address U.S. concerns.

Conflict with Canada Could Cost Both Countries

In a review on the potential negotiations with Canada, BMO Economics laid out a range of outcomes that could result from the negotiations. While a best-case scenario could see tariffs remain at current levels, a breakdown in negotiations could lead to a significant divide between the U.S. and its northern neighbor.

As a result of their most likely worst-case scenario, tariffs on Canadian imports could increase to 35%, while Canada would be likely to retaliate with 15% tariffs on U.S. goods. That could lead to a 1% drop in U.S. economic activity, while Canada’s economy could eventually contract by 5%. Meanwhile, inflation in both countries would rise under this scenario.

“Such an outcome would provoke deep structural change across the North American economy, much of which would only be felt over the long term,” said the report from BMO Senior Economist Aaron Goertzen. “Both sides would find it more difficult to compete against overseas regional value chains. On both sides, real incomes would be relatively lower and consumer choice relatively narrower.”