U.S. court ruling deals legal blow to Trump’s tariffs, but no relief for Canada just yet
The United States Court of International Trade dealt a legal blow to Donald Trump ’s justification for tariffs on Wednesday, but industry watchers say it will ultimately not bring the U.S. trade war to an end.
The ruling, which will be appealed by the White House, argues the president exceeded his authority to impose tariffs under the International Emergency Economic Powers Act (IEEPA).
The three-judge panel gave the U.S. government 10 days to remove the 30 per cent tariffs on China, the 25 per cent duties on Mexico and Canada, and the 10 per cent “reciprocal” tariffs on global imports coming into the U.S.
Trump has cited a fentanyl crisis at the Canadian and Mexican borders as justification for the use of IEEPA and trade imbalances as justification for the global tariffs he enacted in early April.
The ruling does not impact current tariffs in place on Canadian steel, aluminum and automobiles, but most Canadian goods are currently exempted under the Canada-U.S.-Mexico Agreement (CUSMA) .
In the House of Commons on Thursday, Prime Minister Mark Carney said the Canadian government “welcomes yesterday’s decision by the U.S. Court of International Trade, which is consistent with Canada’s longstanding position that the U.S. IEEPA tariffs were unlawful as well as unjustified.”
However, others say there are strong indications that Trump’s administration will win on appeal.
Mark Warner, principal council and a trade expert at MAAW Law, said the 10-day order would be stayed if the U.S. government is successful on appeal.
“This case will ultimately be decided on appeal,” he said, adding that the court’s questioning of presidential authority and the use of nationwide injunctions will come under more scrutiny by higher courts. “I would expect that the decision to be stayed.”
If the appeal is upheld, importers are entitled to refunds on the duties they’ve paid. But Warner said the Trump administration could take its appeal all the way to the Supreme Court.
Trump has used tariffs as leverage in trade negotiations currently underway with several countries. On May 8, the U.S. and the United Kingdom announced a deal that would cut U.S. tariffs on U.K. cars to 10 per cent from nearly 30 per cent. In exchange, the U.K. would offer better market access to U.S. beef. However, the 10 per cent baseline tariff remains in place under the agreement.
“These activist judges are trying to slow down something right in the middle of really important negotiations,” Kevin Hassett, Trump’s adviser and the national economic council director, said in an interview on Fox Business. “The idea that the fentanyl crisis in America is not an emergency is so appalling to me that I’m sure when we appeal, this decision will be overturned.”
Derek Holt, an economist at the Bank of Nova Scotia, said Trump also has other options at his disposal to implement tariffs without congressional approval, including Sections 201, 122 and 301 of the trade act, Section 232 of the trade expansion act and Section 338 of the tariff act.
“The problem with this approach is that it could turn into a game of tariff whack-a-mole; as soon as they convert from IEEPA tariffs to use some other tool, another court could issue another ruling against that other tool and so on,” he said in a note.
In the meantime, Holt said trade uncertainty will remain for businesses and markets.
“The problem is it doesn’t resolve a fundamental question, which is uncertainty,” said Derek Burney, a former political strategist for the Brian Mulroney and Stephen Harper governments and former Canadian ambassador to the U.S. “Uncertainty in markets, uncertainty for investors and uncertainty for importers.”
The Canadian business community has reacted cautiously to the court’s ruling. Canadian Chamber of Commerce chief executive Candace Laing said they will wait for the ruling to make its way through the courts, but that a negotiated deal between the U.S. and Canada should remain a priority.
“Ultimately, the end of this trade war with the U.S. will not come through the courts,” she said in a statement. “It will come when we have negotiated a durable, new agreement on trade that is trusted and respected by all involved.”
• Email: jgowling@postmedia.com
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