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As U.S. President Donald Trump intensifies his tariff strategies following a Supreme Court ruling that curtailed some of his powers, Canada braces itself for potential economic fallout. With the introduction of a new 10-per-cent global tariff and the continuation of sectoral tariffs on critical industries, the Canadian economy faces renewed threats, particularly in sectors like automotive, steel, and pharmaceuticals.
The Supreme Court Ruling and Its Implications
In a significant development, the U.S. Supreme Court ruled against Trump’s use of emergency powers to impose certain tariffs, which had generated over US$134 billion during his presidency. In response, Trump has vowed to introduce a global tariff aimed at reinstating his trade war strategies, although these measures are temporary and will last only 150 days unless Congress intervenes to extend them.
This court decision raises alarms for Canadian industries that have already been grappling with the impact of existing tariffs under Section 232 of the U.S. Trade Expansion Act. These tariffs, which encompass a range of goods including automobiles and steel, have disproportionately affected Canada due to the absence of tariffs on most other products.
Sectoral Tariffs: A Tool for Trade Pressure
“Canada should prepare for new, blunter mechanisms to be used to reassert trade pressure, potentially with broader and more disruptive effects,” warned Candace Laing, President and CEO of the Canadian Chamber of Commerce. Currently, the U.S. maintains Section 232 tariffs on various products including steel, aluminium, and automotive parts. Before any new tariffs can be imposed, a formal investigation by the U.S. Commerce Department must take place, which includes the issuance of a report on the findings.
Additional national security investigations are also underway, targeting sectors such as semiconductors, pharmaceuticals, and commercial aircraft. Although no conclusions have been reached yet, experts believe the Trump administration may be waiting for a strategic moment to introduce new sectoral tariffs.
Economic Impact on Canada
The potential impact of these tariffs could be severe. According to the Council on Foreign Relations, approximately US$160 billion in Canadian imports could be affected by existing or future Section 232 tariffs. While some sectors under investigation are relatively small—like the US$32 million in polysilicon exports—others, such as commercial aircraft, represent a significant portion of Canada’s trade with the U.S.
In 2024, Canada was the largest supplier of commercial aircraft and jet engines to the U.S., a fact that has already put the industry at risk. Trump has previously threatened to decertify Canadian aircraft unless certain U.S.-manufactured jets received approval from Canadian authorities. Such disruptions could further hinder Canada’s already struggling export market, which saw a 20.5 per cent increase in aircraft exports in December, largely due to demand from the U.S.
Broader Investigations and Future Tariffs
In addition to the global tariff, Trump has indicated plans to initiate investigations under Section 301 of the Trade Act of 1974. This could target countries engaging in perceived unfair trading practices, with Canada being a possible focus due to its supply management system for dairy and other commodities, along with various import restrictions.
Timothy Keeler, a trade lawyer, noted that the administration is likely to pursue these investigations to replicate the effects of previous tariffs, aiming for a similar impact on Canadian exports. It remains to be seen if they can effectively mimic past strategies, but the pressure on Canadian industries is expected to mount.
Why it Matters
The intensification of U.S. tariff policies under Trump poses a significant threat to Canada’s export-driven economy. With key sectors already vulnerable, the potential for new tariffs and investigations could disrupt trade relations further, leading to broader economic repercussions. As both countries navigate this complex landscape, the implications of these trade strategies will be felt not just in the immediate term, but for years to come.
