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US Gasoline Hits $4.02 Per Gallon — Largest Monthly Surge in GasBuddy’s History as Diesel Reaches $5.45 and Consumer Pain Reshapes Midterm Politics
Today’s USA and Canada intelligence brief leads with the price Americans see every day. The national average for regular gasoline reached $4.02 per gallon on Tuesday — the first time US drivers have collectively paid this much since August 2022, following Russia’s invasion of Ukraine. The rise of $1.06 in a single month represents the largest monthly gasoline price increase GasBuddy has ever recorded. Diesel — the fuel that moves freight, delivers goods, and powers agriculture — hit $5.45 per gallon, up from $3.76 before the conflict began. Americans have collectively spent an estimated $8 billion more on gasoline since late February, according to GasBuddy’s petroleum analysis head Patrick De Haan.
The domestic impact is immediate and uneven. California drivers are paying $5.87 per gallon. Oklahoma drivers are paying $3.25. The variation reflects state taxes, refinery proximity, and supply logistics — but the political impact is universal. A Reuters/Ipsos poll found that 55% of households say their finances have been affected, with 21% reporting a “great deal” of impact. Fed Governor Waller’s observation that lower-income consumers are “making more frequent trips to stores with fewer purchases during each visit” captures the behavioural shift that $4 gas produces. The top 20% of earners — who own the majority of stocks and benefited from 2025’s market rally — remain resilient. The bottom 60% — who own 15% of stocks but account for 45% of consumer spending — are cutting back.
The policy response has been limited. The EPA temporarily waived summer restrictions on E15 gasoline (15% ethanol blend), effective May 1 through May 20, with possible extension. The administration is releasing oil from the Strategic Petroleum Reserve as part of the IEA’s coordinated 400-million-barrel global drawdown. Sanctions on Venezuelan and Russian oil have been temporarily eased. But analysts are blunt: these measures slow the surge, they do not reverse it. “The president doesn’t have a whole lot of levers,” De Haan said. Oil needs to start moving through Hormuz again for prices to fall meaningfully. If the strait remains blocked, analysts warn the national average could climb toward $4.50 or even approach the $5 record set in June 2022.
For Latin American investors, US gasoline prices are the single most important domestic political indicator in the world’s largest economy. When gas crosses $4, consumer confidence falls, retail spending contracts, and incumbent politicians lose elections. The $4 threshold arrived in a midterm election year, with Trump’s approval at historic lows (Story 4), and with Democrats campaigning on cost-of-living. The gasoline price also drives demand for Latin American crude: the US has eased Venezuelan sanctions specifically to access non-Hormuz supply. Ecuador’s heavy crude, Colombia’s output, and Brazil’s pre-salt all become more strategically valuable when the US is paying $4+ at the pump. As our previous USA and Canada intelligence brief noted, American energy prices transmit directly into Latin American export revenues — and into the political calculations that determine US trade policy.
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Post-SCOTUS Tariff Landscape: Section 122’s 10% Tariff Expires July 24 — Congress Must Vote to Extend Before November Midterms, $175 Billion in Refunds Pending
The Supreme Court’s February 20 ruling in Learning Resources, Inc. v. Trump — holding 6-3 that IEEPA does not authorise presidential tariffs — has produced the most consequential reshaping of US trade policy since the original tariffs were imposed. All IEEPA-based tariffs terminated at midnight on February 24. Within hours, Trump invoked Section 122 of the Trade Act of 1974 to impose a replacement 10% tariff on most imports. But Section 122 carries a hard legal constraint that IEEPA did not: the tariffs must end within 150 days — July 24, 2026 — unless Congress votes to extend them. That vote must happen before the November midterm elections.
The fiscal and political arithmetic is staggering. Penn Wharton estimates that $164.7 billion in IEEPA tariffs were collected through January 2026, with the total potentially reaching $175 billion including February collections. Senate Democrats introduced legislation requiring full refunds with interest. Former Senator Sherrod Brown — running in Ohio’s special Senate election — is campaigning on “$1,336 refund for every Ohio household.” The Yale Budget Lab calculates that remaining tariffs (Section 232 on steel, aluminum, autos; Section 122 at 10%; Section 301 on China from the first term) add 0.6% to consumer prices and push unemployment 0.3 percentage points higher. Justice Kavanaugh warned in his dissent that the refund process will be “a mess.”
The July 24 expiry creates a political trap. If Congress votes to extend the Section 122 tariffs, every member goes on record supporting a tax that costs households $800-$1,300 per year — three months before midterms. If Congress lets them expire, the effective US tariff rate falls sharply, importers benefit, but the administration loses its primary trade leverage over China, the EU, and North American partners. Section 232 tariffs on steel (25%), aluminum (25%), and autos remain regardless — as do pending Commerce Department probes into semiconductors, pharmaceuticals, and drones that could produce new 232 tariffs. The tariff era is not over; it has been restructured.
For Latin American trade, the post-SCOTUS landscape is directly consequential. The IEEPA tariffs on Canadian and Mexican goods under USMCA are gone. The Section 122 replacement at 10% is temporary. Section 232 tariffs on steel and aluminum (50% for Canada) remain and hit Latin American metal exporters. The USMCA mandatory six-year review is approaching, and the SCOTUS ruling has changed the leverage dynamics: Trump can no longer threaten unlimited tariffs by executive fiat, forcing the administration to negotiate within statutory limits. For Brazilian steel, Mexican auto parts, Colombian goods, and Chilean copper, the tariff landscape is more predictable than at any point since January 2025 — but the July 24 cliff creates a three-month window of uncertainty that affects every supply chain decision. As our previous tariff coverage tracked, Latin American exporters should be positioning for either outcome.
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US Payroll Employment Likely Fell in 2025 — Fed Governor Waller: “Only the Third Time Since 1945, Unrelated to a Recession”
The US labour market entered 2026 in worse shape than the headline numbers suggested — and the annual revisions confirmed it. Fed Governor Waller, in a February 23 speech on the economic outlook, revealed that the January employment report’s annual revisions “turned 2025 from a year with relatively weak job creation into one of the weakest years in decades outside of a recession.” Officially, 181,000 new jobs were reported for the full year — an average of only 15,000 per month. But Waller stated that even after those revisions, there likely remains an upward bias from April through December, and “it seems clear that payroll employment in the United States probably fell in 2025.”
The structural fragility is concentrated. Nearly 90% of net private job creation through late 2025 occurred in a single sector: healthcare and social assistance. In ADP data, firms with 250 or more employees added workers, while smaller firms shrank. The Philadelphia Fed’s Anna Paulson characterised the labour market theme for 2026 as “waiting for clarity,” noting that strong GDP growth (Q3 2025 at 4.4% annualised) is coexisting with a slowing labour market — a divergence that complicates the Fed’s dual mandate. Vice Chair Bowman described the labour market as “more fragile” beneath the surface, with hiring rates “concerningly low” even though layoff rates are also low, suggesting firms are “delaying major labour decisions.”
The consumer spending divergence amplifies the employment signal. Waller reported that retailers describe a “divergence between higher income shoppers, whose spending remains resilient, and lower- and middle-income customers, who are starting to spend less or switch to lower-cost goods.” The strong stock market gains of 2025 boosted wealth for the top quintile, who account for 35% of spending. The bottom 60% — who account for 45% of spending — “are relatively less affected by higher prices” according to research, but that research predates the $4 gasoline and $5.45 diesel that are now compounding their cost-of-living squeeze. The labour market that America carries into the midterms is one where jobs are scarce, the few being created are concentrated in one sector, and the consumers who drive the economy are splitting into two classes.
For Latin American investors, the US labour market matters because consumer spending accounts for roughly 70% of American GDP — and Latin American exports to the US are directly tied to that spending. When the bottom 60% of US households cut back, the first casualties are discretionary imports: Mexican manufactured goods, Colombian cut flowers, Peruvian asparagus, Brazilian coffee at premium price points. The concentration of job creation in healthcare means that the sectors most likely to demand Latin American goods — manufacturing, construction, retail — are the sectors that are not hiring. The Fed’s rate path (market expects two 25bp cuts in 2026) depends on whether the labour market stabilises or deteriorates further. If it deteriorates, rate cuts support the economy but weaken the dollar — boosting Latin American commodity exports priced in USD. As our previous coverage noted, the Fed is navigating a dual mandate where both sides — inflation and employment — are sending uncomfortable signals.
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Trump Approval Collapses to 59% Disapproval — Gas Prices and Cost of Living Become Central Midterm Battleground
The latest Fox News poll shows 59% of voters disapprove of President Trump’s job performance — up from 51% in the same poll a year earlier. The eight-point deterioration tracks directly with the gasoline price surge: GasBuddy calculates that Americans have spent an extra $8 billion on fuel since the conflict began, and the $4.02 national average arrived in a midterm year where every House seat and a third of the Senate are on the ballot. The political dynamic is particularly damaging because Trump explicitly campaigned on lowering energy prices — and his White House celebrated “big wins” on gas prices just weeks before the conflict began.
The midterm landscape is shifting in real time. Democrats are building their campaigns around cost-of-living: the $175 billion IEEPA refund legislation, proposals for direct household refunds ($1,336 per Ohio household per Sherrod Brown), and the narrative that “Trump’s war raised your gas prices.” The Section 122 tariff expiry on July 24 forces a Congressional vote that puts every Republican on record either supporting or opposing tariffs three months before Election Day. The California primary — where Euronews describes a “disaster looming for Democrats” — suggests that the political pain is not exclusively Republican; voters are punishing all incumbents in a high-cost environment.
The economic fundamentals beneath the polling are concerning for the administration. The Tax Foundation estimates tariffs have raised the average household’s expenses by $1,100-$1,300. Medicaid coverage reductions from Trump’s spending and tax bill are removing millions of Americans from healthcare. The $2,000 tariff rebate checks Trump proposed require congressional approval and face Senate scepticism. The administration’s economic narrative — deregulation, tax cuts, energy abundance — is being overwhelmed by a reality of $4 gas, stagnant hiring, and a Supreme Court that struck down its signature trade policy. When 59% of Fox News respondents disapprove, the president’s base is eroding, not just the opposition growing.
For Latin American governments and investors, US midterm dynamics matter because they determine the trajectory of trade policy, immigration enforcement, aid flows, and diplomatic attention to the hemisphere. If Republicans lose their thin majorities in either chamber, the Section 122 tariffs are less likely to be extended, the USMCA renegotiation loses White House leverage, and Congressional oversight of Latin America policy increases. If Republicans hold, tariff-driven trade policy continues with whatever statutory tools survive SCOTUS scrutiny. The political dynamic also affects US-Latin America immigration policy: as Trump’s approval falls, enforcement actions that play to the base intensify — with direct consequences for Central American, Mexican, and South American diaspora communities. The November midterms are being decided at the gas pump, and Latin America is downstream of every outcome.
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Canada’s Economy Under “Structural Transition” — GDP Growth Below 1%, Bank of Canada Trapped, USMCA Review Approaching at the Worst Possible Moment
Canada’s economy is experiencing more than a cyclical slowdown — it is undergoing a structural transition. RSM’s economic outlook describes real GDP growth decelerating below 1%, with US tariff policy “taking a toll on labour, spending and economic growth.” The Bank of Canada has cut rates but markets are not pricing further relief in 2026. Unemployment is expected to reach 6.7%. Oxford Economics projects growth of just 1.4%, with the Bank of Canada “in a difficult position that will not get any easier.” Prime Minister Carney’s declaration that “the old relationship with the United States, a relationship based on steadily increased integration, is over” is not rhetoric — it is an economic assessment.
The USMCA’s mandatory six-year review is approaching under the worst possible conditions. Article 34.7 requires the three governments — US, Canada, Mexico — to decide whether to extend the agreement to 2042, place it under annual reviews, or allow it to expire in 2036. CSIS analysis concludes the agreement will “stagger on as a zombie, neither fully dead nor alive.” The good news: USMCA-compliant goods still enjoy lower effective tariffs (85%+ of Canada-US trade remains tariff-free). The bad news: Section 232 tariffs (50% on steel and aluminum) bypass USMCA and hit Canada’s industrial base directly. Trump has threatened 100% tariffs on all Canadian imports if Ottawa finalises a trade agreement with China.
Carney’s response is a simultaneous pivot to domestic spending and international diversification. The April 1 Ontario housing partnership eliminates the full 13% HST on new homes up to $1 million — saving buyers up to $130,000 and expected to generate 8,000 housing starts and 21,000 jobs. Bill C-26 provides $1.7 billion to provinces for housing supply. The “Buy Canadian” policy directs up to $70 billion in public procurement toward domestic products. The Canada Groceries and Essentials Benefit increases the GST credit by 25% for five years starting July 2026. And the Canada-Mexico Action Plan 2025-2028 coordinates positions with Mexico City ahead of the USMCA review — recognising that Washington will try to divide and conquer its two neighbours.
For Latin American investors, Canada’s structural transition has three direct implications. First, the USMCA review affects Mexico as profoundly as it affects Canada — and the Canada-Mexico Action Plan signals coordinated resistance to Washington’s renegotiation demands. Second, Canada’s trade diversification agenda creates opportunities for Latin American partners: Carney is actively seeking alternatives to US dependency, and Latin American commodity exporters (Chilean lithium, Brazilian agricultural products, Colombian energy) are natural fits. Third, the Bank of Canada’s rate path affects Canadian investment flows into Latin America: Canadian pension funds and mining companies are major investors in Latin American mining, infrastructure, and real estate. If the Canadian economy deteriorates further, those investment flows slow — but the diversification imperative may redirect capital southward as the US relationship degrades. As our previous coverage noted, Canada at a “hinge moment” means Latin America at an opportunity moment.
