In a significant ruling, the U.S. Supreme Court declared on Friday that President Donald Trump’s tariffs on Canada and several other nations were unlawful. However, this verdict does not signify the conclusion of his contentious global trade policies. The court’s decision primarily pertains to tariffs imposed under emergency powers, including the controversial “reciprocal” tariffs and additional duties aimed at Canada concerning fentanyl. As a result, Trump is now restricted from leveraging this authority to threaten or impose further tariffs at will.
Tariffs Remain Despite Ruling
The Supreme Court’s ruling specifically addresses the tariffs enacted under the International Emergency Economic Powers Act (IEEPA), a law from 1977 that permits the president to manage economic transactions during emergencies. Trump previously argued that the Act allowed him to enforce tariffs in response to declared emergencies—one concerning fentanyl trafficking and another related to significant trade deficits.
At the time of the ruling, Canada was subject to a 35 per cent tariff on certain fentanyl-related products and a lower, 10 per cent rate on energy and fertiliser commodities. However, many goods traded under the Canada-U.S.-Mexico Agreement (CUSMA) were exempt from these tariffs, with Prime Minister Mark Carney noting that approximately 85 per cent of Canadian exports to the U.S. fell within this exemption.
International trade lawyer Robert Glasgow highlighted that while the ruling complicates the tariff landscape, businesses may benefit from reduced compliance costs associated with maintaining the zero per cent rate under CUSMA.
Unanswered Questions and Future Moves
Despite the ruling, Trump remains undeterred, indicating plans to implement a new 10 per cent global tariff under Section 122 of the U.S. Trade Act. This provision allows the president to impose tariffs on imports to address trade deficits, but only for a limited period unless Congress intervenes. Additionally, Trump stated that his administration would launch “several” investigations under Section 301 of the Trade Act, a tool previously utilised to challenge unfair trading practices, particularly against countries like China.
The continuing uncertainty raises questions about whether American businesses that incurred additional costs due to these now-unlawful tariffs will receive refunds. “We’ve taken in hundreds of billions of dollars,” Trump remarked, suggesting that the absence of clarity in the ruling could lead to prolonged litigation.
Several businesses, including Costco, have already initiated legal action to ensure their refunds if the tariffs are invalidated. Dan Anthony, executive director of the coalition We Pay the Tariffs, emphasised the need for a swift refund process, arguing that small businesses cannot endure bureaucratic delays.
The Ongoing Tariff Saga
While the Supreme Court’s ruling has struck down certain tariffs, others remain firmly in place. Tariffs on steel, aluminium, and automobiles were enacted under Section 232 of the U.S. Trade Expansion Act, which allows the president to act against imports deemed a national security threat. These tariffs have not been affected by the court’s decision, and Trump retains the option to impose additional tariffs using this legal framework.
Glasgow observed that the administration is likely to explore every possible avenue to impose further tariffs, indicating that the trade conflict is far from over. “It’s not the end of the war,” he stated, underscoring the persistent volatility in international trade relations.
Why it Matters
This ruling highlights the intricate balance of power between the judiciary and the executive in shaping U.S. trade policy. While the Supreme Court’s decision curtails Trump’s ability to impose tariffs under emergency powers, it leaves the door open for continued tariffs under other legal frameworks. As such, businesses and trade relations, particularly with Canada, remain in a state of flux, suggesting that the global trade landscape will continue to shift amid ongoing tensions and policy changes. The uncertainty surrounding potential refunds for businesses adds yet another layer of complexity to an already tumultuous trade environment.
