In this issue6 sections
The tariff bill is shrinking, and the commodity bill is taking its place. Last edition asked who in the middle of the supply chain would absorb rising producer prices. This week’s earnings and policy news gave part of the answer: Washington is cutting the tariff share of the bill, and energy and materials are adding to everything else. On October 16 the President signed an executive order waiving the Graham Act’s 100% duties on goods from the biggest buyers of Russian oil and gas, two days before they could have applied. Refunds of the struck-down IEEPA tariffs are now showing up in earnings. Hasbro’s third-quarter results include about $55 million of tariff refunds, and $0.25 of RTX’s $2.26 adjusted earnings per share came from IEEPA cost recovery. Procter & Gamble shows what is taking the tariffs’ place. Tariffs added 50 basis points to its gross margin, while commodities took away 140, and it now expects a commodity headwind of about $1.4 billion after tax from “higher raw materials, energy and transportation costs.” Diesel ended its three-week decline, rising 9.7 cents to $6.276 a gallon, as attacks on ships spread through the Persian Gulf. Reefer carriers now reject one in five contract loads. Teams that count tariff refunds as margin relief while energy keeps rising will set 2027 prices too low.
Retail & Consumer Spotlight: P&G Bought Volume With Margin
Last Edition’s Question: Who Pays the Gap?
Last edition showed producer prices rising almost twice as fast as consumer prices and asked who would absorb the difference. P&G, the clearest test of a branded-goods company’s pricing power, reported on Thursday that it is absorbing it. Organic sales rose 4%. The company said that growth came from “a two percent increase from volume and a one percent increase from favorable mix,” and that “Pricing had a minor positive impact on sales for the quarter.” The volume gains cost margin. Reported gross margin fell 160 basis points to 49.8%. P&G attributed the decline to “140 basis points of higher costs from commodities, 140 basis points of product reinvestments,” which were partly offset by 120 basis points of productivity savings, “50 basis points of tariff impact from lower costs and recognized recoveries” and 20 basis points of pricing. Core earnings per share rose only 1%, to $2.00.
Over the full year the trade-off gets bigger. P&G “now expects a commodity cost headwind of approximately $1.4 billion after tax,” along with $300 million from higher interest expense, which it says together equal $0.79 a share in fiscal 2027. It kept its organic sales guidance at 1% to 3% and its core EPS guidance at flat to up 3%. If P&G, with its brands and buying power, is holding prices and absorbing costs, retailers will expect smaller suppliers to do the same.
Refunds Are Flattering the Quarter
Some companies are being helped by tariff refunds. Hasbro raised its 2026 revenue outlook to 7% to 9% growth in constant currency and doubled its buyback target, after a quarter in which “Results include approximately $55 million of tariff refunds,” $48 million of it in Consumer Products. RTX raised its full-year adjusted EPS guidance to $7.65 to $7.75, and $0.25 of its third-quarter $2.26 was IEEPA cost recovery: about $250 million at Collins and $160 million at Pratt & Whitney. These amounts were paid once and will be refunded once. They do not recur.
The consumer gives no reason to raise prices in the meantime. NRF’s October 15 forecast calls for holiday sales to rise 4.2% to $1.013 trillion. Chief economist Mark Mathews warned that “inflation, rising gas prices and pressure on household spending” will hit income groups differently. The Fed raised its target range by a quarter point to 3.75%–4.00% on September 17. Prediction markets put the chance of a hold at next week’s meeting at about 91% as of Thursday morning.
Take tariff refunds out of the run-rate before you build 2027 budgets or answer a customer’s request for a price cut. If your finance team has netted refunds against 2026 cost of goods, rebuild the baseline without them. Then go into Q4 retailer meetings with your commodity exposure, not your tariff exposure, because commodity costs are the ones still rising, as P&G’s 140 basis points show.
Global Logistics Pulse: Fuel Turned Back Up, and Capacity Is Still Short
Diesel: The Decline Is Over
Last edition warned that the Hormuz sinking could end diesel’s decline, and it did. DOE’s October 19 average was $6.276 a gallon, up 9.7 cents, after $6.199 and $6.179 in the previous two weeks. Diesel is $2.656, or about 73%, above a year ago. The West Coast rose most, 15.4 cents to $7.394, and California reached $8.242. A surcharge table with a $3.50 base at 6 miles per gallon now adds about 46.3 cents a mile, up from 44.7 cents. Brent “touched $110 a barrel” on October 16, according to Al Jazeera.
Since GFS PRIDE sank last week, the attacks have spread further across the Persian Gulf. UKMTO counted at least 12 ships attacked in the week ending October 16, one of which sank, according to Al Jazeera. gCaptain reported two more tankers hit on October 20 and 21, one off Bukha, Oman and one southeast of Al Faw, Iraq. The Joint Maritime Information Center kept Hormuz at its highest threat level, SEVERE, raised the wider Gulf to SUBSTANTIAL, and said “deliberate attacks remained highly likely.” Al Jazeera, citing Kpler, put oil flows through Hormuz in the seven days to October 13 at 11.6 million barrels a day, about 68% of the prewar 17.1 million. Keep fuel surcharges floating. Any carrier that offered a fixed all-in rate three weeks ago, when diesel was falling, would now ask for more.
Truckload: Reefer Is Where Capacity Runs Out First
DAT’s report for October 10 to 16 shows a market where fuel is changing and capacity is not. Van spot fell 3 cents to $3.09 a mile on lower fuel surcharges, while van linehaul held at $2.26, up 35% from a year earlier. Load posts are running 12% to 23% above last year and truck posts 21% to 27% below. “Capacity remains the key factor in pricing,” said DAT’s Dean Croke. FreightWaves’ SONAR put national tender rejections at 13.9% on October 20, within the 13%–14% range they have held since August. Reefer rejections reached 21.44% on the fall harvest. “I expect to see refrigerated rates continue to rise even more than van rates,” said FreightWaves’ Julie Van de Kamp.
Knight-Swift’s results on Wednesday showed the cause. Adjusted EPS rose to $0.83 from $0.32, and the truckload adjusted operating ratio improved 700 basis points to 89.2%. CEO Adam Miller said “Industry capacity remains under pressure, and sourcing quality drivers is as challenging as it has been in years.” He also expects “a solid truckload peak season, as consumers have remained resilient.” When the largest truckload carrier says drivers are the constraint, fuel savings will not lower contract rates in your 2027 bid. Lock in temperature-controlled capacity for November and December now. Reefer shippers who leave peak volume to the spot market are bidding against harvest freight for capacity that rejects one in five loads.
Ocean: Asia–Europe Rises, and the Suez Return Gives Shippers Leverage for 2027
Drewry’s World Container Index rose 2% on Thursday to $4,585 per 40-foot container, its second straight weekly gain and the highest level in 15 weeks. Shanghai–Rotterdam rose 3% to $3,632 and Shanghai–Genoa 5% to $4,152. Carriers have announced eight Asia–Europe blank sailings for next week, up from two, and Drewry expects rates there “to increase slightly next week amid tight capacity.” Freightos’s October 20 update shows the same direction: Asia–North Europe up 6% to $3,442 and Asia–Mediterranean up 3% to $3,927. On the transpacific, Drewry’s Shanghai–Los Angeles rose 2% to $8,007 and Shanghai–New York 1% to $10,166, while Freightos had Asia–U.S. West Coast flat at $8,126. Long Beach moved 997,177 TEUs, up 25% and the most in its history, which together with Los Angeles’s record month puts the San Pedro Bay ports at about 2.04 million TEUs.
The bigger signal is what happens after the current rate increases. Freightos says “container carriers continue their steady march back through the Suez,” and that the market expects transits to fully recover in the first quarter of 2027. It adds that “the Red Sea return – if geopolitics allow its completion – increases the overcapacity risk for carriers in 2027.” Drewry wrote last week that “fewer blank sailings and the resumption of Suez Canal transits are adding further capacity to the route.” 2027 tender talks are starting while carriers can see that extra capacity coming. On Asia–Europe, don’t sign a 2027 fixed rate based on this month’s increases. Ask for index-linked pricing with a Red Sea clause that sets the surcharge in advance if carriers divert again. On the transpacific, keep holding awards until early November.
Rail and Intermodal: Railroads Are Pricing for Strength
AAR reported U.S. intermodal volume of 308,015 units in the week ending October 17, up 12.6% from a year ago, the second straight week of double-digit growth. Union Pacific’s revenue rose 15% to $7.2 billion, with carloads up 6%. CSX’s operating margin widened 880 basis points to 39.1%, and Norfolk Southern posted record quarterly revenue of $3.5 billion, of which fuel surcharges contributed 8 points of growth. J.B. Hunt said “Overall demand for our intermodal service was strong throughout the quarter.” Intermodal remains the cheaper option on long-haul lanes, but the railroads are pricing it while demand is strong. Get intermodal pricing on long-haul lanes into your 2027 bid now, because that discount to truck will narrow as the railroads keep raising rates.
Air: Holiday Air Rates Are Climbing
Freightos’s air index had China–North America at $6.88 a kilogram, up 19% in a week, and China–North Europe up 8% to $3.87. If any holiday product still depends on air from Asia, book it now.
Trade Policy Watch: Washington Is Removing Tariffs. The Deadlines Remain.
The Graham Act Tariffs Arrived Already Waived
Last edition told you to price India- and Russian-energy-exposed supply at a 100% duty as a downside case before the Graham Act’s October 18 trigger. Executive Order 14436, signed October 16 and published in the Federal Register on October 21, removes that case for now. It restates the statute: duties on goods from “the largest 5 importers of crude oil and natural gas that originated in the Russian Federation shall be increased by 100 percent ad valorem” if they knowingly buy on or after October 18, and duties on Russian goods rise 500%. It then adds: “I hereby waive the application of any duties provided for in sections 112 and 113 of the Graham Act or this order.” The order names no country. USTR is told to monitor purchases and report to the President, and the waivers last until the President or Secretary of State decides “that further action is appropriate.”
During his India visit, Secretary of State Marco Rubio told The Indian Express on October 20 that “None of these tariffs are done to punish or harm India,” and in Mumbai he described a U.S.–India trade deal as “about as close as you can be without having executed the agreement.” AP reports the current tariff on most Indian goods is 18%. Keep the 100% downside case in your models, but stop treating it as the base case. The law is still in force, and the White House can lift the waiver at any time without a new act of Congress. Sourcing from India now carries less risk than it did last week, but buyers should get a change-in-law clause before moving volume there.
Refunds Are Coming, but on No Set Schedule
On October 8 the Court of International Trade certified a class of importers who paid IEEPA duties from February 1, 2025 to February 19, 2026 and have not sued. As Troutman noted, “Certification is not a ruling on the merits or an order directing refunds”; a proposed scheduling order was due Thursday. On Section 301, the forced-labor tariffs of 10% and 12.5% on 60 economies remain in effect while the CIT considers the parties’ October 16 briefs, in which the government now says USTR relied on the “unreasonable” standard in Section 301(d)(3)(A). That is a change from its position at oral argument. A new case started Tuesday: Gellert Global Group filed a proposed class action challenging the 50% Section 338 tariffs on Canadian goods, including on nondelegation grounds. Record every Section 301 and Section 338 entry at the line level now. When a ruling comes, refunds will go to importers who can document their entries.
The November Deadlines
Several deadlines fall in the second week of November. The suspension of U.S. port fees on China-linked vessels still lapses at 11:59 p.m. on November 9, and the Federal Register API shows no USTR documents published October 16 through 23. BRG reports that “The negotiations extended the broader trade truce through January 10, 2027,” but also that the suspension of BIS’s Affiliates Rule expires November 9 and that the suspension “is reportedly being extended, but BIS has not yet published the amendment.” China’s one-year suspension of its October 2025 rare-earth export controls runs to November 10. Beijing has extended the broader truce, but we found no official notice extending the rare-earth suspension with it. Manufacturers are already reporting the risk. Lockheed lists “rare earth minerals and microelectronics” among its materials risks, and GE Aerospace, whose “Material input from priority suppliers increased double-digits,” agreed to buy castings maker CPP to secure capacity.
North America is still unsettled. Mexico’s economy secretary, Marcelo Ebrard, told lawmakers on October 16 that he expects Section 232 tariff cuts within weeks or months, according to The Rio Times, but no date has been set for the next USMCA round. CBP moved the formal-entry requirement for certain mail shipments from October 22 to January 20, 2027, and is temporarily letting the new Entry Type 13 informal mail entry be filed without partner-agency data. Treat November 9 and 10 as a hard date in your carrier and supplier plans. Ask your ocean carriers in writing how they would apply port fees, have your compliance team review any supplier that is 50% or more owned by an entity on the Entity List, and confirm how much magnet and rare-earth inventory your component suppliers hold past November 10.
📊 Numbers That Matter
Weekly Dashboard: Week of October 19–23, 2026
| Metric | Reading | Source |
|---|---|---|
| Retail diesel (DOE weekly, Oct 19) | $6.276/gal, +9.7¢ WoW; +$2.656 (~73%) YoY; West Coast $7.394; California $8.242 | EIA |
| Brent crude | Touched $110 on Oct 16; range $97–$112 in October | Al Jazeera; Transport Topics |
| Hormuz attacks | At least 12 ships attacked in week to Oct 16 (1 sunk); 2 more tankers hit Oct 20–21; JMIC: SEVERE | UKMTO via Al Jazeera; gCaptain |
| Drewry WCI (Oct 22) | $4,585/40ft (+2%), highest in 15 weeks; Shanghai–LA $8,007 (+2%); Shanghai–NY $10,166 (+1%); Shanghai–Rotterdam $3,632 (+3%); Shanghai–Genoa $4,152 (+5%) | Drewry |
| Freightos FBX (Oct 20 update) | Asia–USWC $8,126 (flat); Asia–USEC $9,700 (+1%); Asia–N. Europe $3,442 (+6%); Asia–Med $3,927 (+3%) | Freightos |
| Freightos Air (Oct 20 update) | China–N. America $6.88/kg (+19%); China–N. Europe $3.87/kg (+8%) | Freightos |
| Port of Long Beach (Sept) | 997,177 TEU, +25% YoY, all-time monthly record; loaded imports +31.3% | Port of Long Beach via Container News |
| DAT spot (Oct 10–16) | Van $3.09/mi (−3¢), linehaul $2.26 (+35% YoY); reefer $3.66; flatbed $3.64; van L/T 9.7 | DAT via AJOT |
| SONAR tender rejections (Oct 20) | National 13.9%; reefer 21.44% | FreightWaves |
| Rail (week ending Oct 17) | U.S. intermodal 308,015 (+12.6% YoY); carloads 232,120 (+3.5%); total 540,135 (+8.5%) | AAR via AJOT |
| P&G (FQ1 FY27) | Organic sales +4%; gross margin 49.8% (−160 bp; commodities −140 bp, tariffs +50 bp); FY commodity headwind ~$1.4B after tax | P&G |
| IEEPA refunds in earnings | Hasbro ~$55M; RTX $0.25 of $2.26 adjusted EPS | Hasbro; RTX |
| Knight-Swift (Q3) | Adjusted EPS $0.83 vs. $0.32; truckload adjusted OR 89.2% (−700 bp); Q4 guide $0.78–$0.84 | Knight-Swift |
| Fed funds | 3.75%–4.00% after Sept 17 hike; ~91% odds of hold on Oct 28 (Kalshi/Polymarket, Oct 22) | Federal Reserve; DeFi Rate |
Looking Ahead
- October 23: University of Michigan final October sentiment and S&P Global flash PMIs; watch input-price components for whether manufacturers’ input costs are still accelerating
- October 26: Nucor reports Q3; read its steel price commentary before your steel-indexed 2027 agreements reset
- October 27: DOE diesel update; a second weekly increase would show the Hormuz attacks have reversed October’s decline in diesel prices
- October 27–28: FOMC meeting; a hold is priced in, and any signal of another hike raises 2027 inventory carrying costs
- October 27–29: Landstar (Oct 27), and XPO and Saia (Oct 29) report; LTL pricing commentary sets the tone for 2027 LTL bids
- November 9: U.S. port-fee suspension on China-linked vessels and the BIS Affiliates Rule suspension both expire unless extended
- November 10: China’s suspension of its October 2025 rare-earth export controls lapses unless renewed
- December 14: Comments due on the FMC’s proposed $200,000 per-voyage fee on Spanish vessels
- January 10, 2027: Current end date of the U.S.–China trade truce
- January 20, 2027: New CBP compliance date for formal entry of certain mail shipments
The Bottom Line
Tariffs are coming down because Washington decided to lower them. Energy and materials costs are going up because of the war in the Gulf, the harvest season and a shortage of drivers. Plan for 2027 accordingly.
Rebuild your 2027 baseline without tariff refunds. Hasbro’s $55 million and RTX’s $0.25 a share are one-time payments. P&G’s $1.4 billion commodity headwind will recur. Strip refunds out of cost of goods, rebuild the budget on commodity and energy exposure, and when a customer asks for a price cut because tariffs have fallen, show them your input-cost index.
Lock in capacity where it’s short, and stay flexible where it’s coming back. Reefer rejections at 21.44% and Knight-Swift’s driver comments say to commit to temperature-controlled and peak truckload capacity now. The Suez return means ocean capacity will grow through the first quarter of 2027. Keep Asia–Europe index-linked, hold transpacific awards until November, and let fuel surcharges float while Hormuz is unsettled.
Plan for the November 9–10 deadlines now. Port fees, the Affiliates Rule and China’s rare-earth pause are all scheduled to lapse within about 24 hours of each other. Get carriers’ port-fee answers in writing, screen ownership of your Chinese suppliers, and find out how many weeks of magnet and rare-earth inventory your component suppliers actually hold.
Strategic question for supply chain leaders: This quarter’s tariff refunds made results look better at Hasbro and RTX, while commodity costs hit P&G’s margins. In your 2027 plan, have you separated what you got back from tariffs from what energy and materials will cost you next year, or is one hiding the other?
