In a landmark ruling on Friday, the U.S. Supreme Court deemed President Donald Trump’s emergency tariffs on Canada and other nations unlawful, yet this decision does not signify the conclusion of his contentious trade policies. The verdict specifically addresses tariffs imposed under emergency powers, including controversial “reciprocal” tariffs and those levied on Canadian goods linked to fentanyl. Despite this setback, Trump retains the ability to impose additional tariffs under different legal frameworks, leaving the door open for ongoing trade disputes.
Ruling Details: What Has Been Struck Down?
The court’s ruling stemmed from two lawsuits challenging Trump’s invocation of the International Emergency Economic Powers Act (IEEPA) of 1977. This law grants the president authority to regulate economic transactions in times of declared emergencies. Trump had argued that the IEEPA allowed him to implement tariffs in response to two crises he declared last year: one concerning fentanyl trafficking from Canada, Mexico, and China, and another focused on significant trade deficits with numerous countries.
At the time of the ruling, Canada was facing a 35 per cent tariff on goods linked to fentanyl, alongside a 10 per cent tariff on energy and fertiliser products. Notably, goods traded under the Canada-U.S.-Mexico Agreement (CUSMA) were exempt from these tariffs, which Prime Minister Mark Carney highlighted, noting that approximately 85 per cent of Canadian exports to the U.S. fall within this exemption.
What Stays in Place: Trump’s Sector-Specific Tariffs
Despite the Supreme Court’s decision, a variety of sector-specific tariffs remain intact, imposed under Section 232 of the U.S. Trade Expansion Act. This statute permits the president to take action against “excessive” foreign imports deemed a threat to national security. The tariffs currently in place include a staggering 50 per cent on steel, aluminium, and copper, and a 25 per cent tariff on automobiles, heavy trucks, and auto parts that do not comply with CUSMA.
Additionally, softwood lumber faces a 10 per cent tariff, compounded by separate anti-dumping duties. Trump has signalled that he may utilise Section 232 for further tariff actions in the future, indicating that the trade conflict remains far from resolved.
New Tariffs on the Horizon: Trump’s Next Moves
In light of the ruling, Trump announced plans to impose a new 10 per cent global tariff using Section 122 of the U.S. Trade Act. This law enables presidents to address trade deficits, albeit with limitations; tariffs can only reach a maximum of 15 per cent and are temporary, lasting no longer than 150 days. Furthermore, he indicated that his administration would initiate “several” investigations under Section 301 of the Trade Act, a measure previously exploited to address perceived unfair trading practices, particularly against China.
Trump controversially claimed that the ruling granted him expansive powers to enact a broad range of trade restrictions, asserting, “the court has given me the unquestioned right to ban all sorts of things from coming into our country.” Legal experts caution, however, that the administration is unlikely to be deterred by the Supreme Court’s decision, with ongoing conflict anticipated.
Refunds for Businesses: An Unresolved Question
While the ruling nullifies certain tariffs, it raises significant questions regarding the potential for refunds to American businesses that incurred additional costs under the now-invalid tariffs. Trump stated, “We’ve taken in hundreds of billions of dollars — not millions.” The absence of explicit guidance in the ruling on refunds has left many businesses, including Costco and a coalition of small U.S. enterprises, seeking legal recourse to recover funds.
Dan Anthony, executive director of the We Pay the Tariffs coalition, emphasised the urgent need for a streamlined refund process, arguing that small businesses cannot afford protracted bureaucratic delays. “These businesses need their money back now,” he stated, highlighting the financial strain that ongoing tariff disputes impose on them.
Why it Matters
The Supreme Court’s ruling may have struck down specific tariffs, but it has not curbed the broader implications of Trump’s trade policies. As the administration pivots to new avenues for imposing tariffs, uncertainty looms over international trade relations, particularly for Canada. The ruling underscores the complexities of the current trade landscape, where ongoing tariffs, potential refunds, and the threat of future levies create a precarious environment for businesses on both sides of the border. As trade discussions continue, the risk of escalating tensions remains a pressing concern for policymakers and economists alike.