Supreme Court Strikes Down Trump's Global Tariffs, But Canadian Firms Face Lingering Trade Risks
The United States Supreme Court delivered a significant ruling on Friday, striking down President Donald Trump's global tariffs imposed under the International Emergency Economic Powers Act (IEEPA). In a 6-3 decision, the court found that Trump had overstepped his executive authority by implementing these tariffs without congressional approval. This ruling represents a legal setback for the former president, who had utilized steep levies as an economic negotiation tool during his second term.
Not a Complete Victory for Canadian Businesses
Despite this judicial victory, Canadian businesses are not entirely out of the woods, according to economists and trade lawyers closely monitoring the situation. While the decision invalidates tariffs implemented under IEEPA, Trump has already signaled his intention to replace them with a ten percent global tariff under section 122 of the 1974 Trade Act.
Mark Warner, principal of MAAW Law, emphasized that the Supreme Court ruling does not apply to tariffs on autos, steel, aluminum, lumber, and certain copper products—the very tariffs that have had the most significant impact on Canadian exports. "It's kind of a victory," Warner noted. "The guy who's been screaming at us has got a finger in his eye—the problem is the tariffs that are hurting us are not affected."
Mixed Reactions from Business Leaders
Joe Brusuelas, chief economist at RSM US LLP, described the ruling as "an unambiguously good development" for small and mid-size Canadian businesses, particularly those in retail and manufacturing sectors. "The ruling is beneficial to the integrated supply chains in auto manufacturing and foodstuffs," he explained in a statement. "If implemented, it could cut the 5.96 percent effective tariff on Canadian goods in half."
Jim Estill, CEO of Danby Products Ltd., a Guelph-based appliance manufacturer, welcomed the court's decision as potentially beneficial for his company. By his calculations, Danby is owed approximately $10 million in tariff-related refunds. "I see this as the start of a process," Estill commented. "I am not expecting a cheque by Tuesday." He added that if sales increase, U.S. consumers might see lower prices for Danby products, though American retailers might request refunds.
Ongoing Uncertainty and Potential New Threats
Matthew Holmes, executive vice president and chief of public policy at the Canadian Chamber of Commerce, warned that the Supreme Court ruling could lead to increased uncertainty for Canadian businesses. Holmes cautioned that the Trump administration might employ "a number of other blunt instruments" to impose additional tariffs, potentially creating further disruption for Canadian exporters.
Holmes highlighted that more than 85 percent of Canada's other exports were already exempt from these tariffs under the Canada-United States-Mexico Agreement (CUSMA). This exemption means that if CUSMA were to break down during its upcoming review this year, the IEEPA tariffs would not automatically come into effect. However, Holmes stressed the importance of Canada continuing to diversify its trade relationships with other countries to provide greater certainty for businesses during this volatile period.
The Supreme Court's decision represents a legal milestone in the ongoing trade tensions between the United States and its neighbors, but Canadian businesses must remain vigilant as the political landscape continues to evolve.
