Supreme Court rules against Trump tariffs, but Canadian companies aren't out of the woods just yet
The United States Supreme court struck down President Donald Trump’s global tariffs on Friday, but the decision doesn’t mean Canadian businesses are out of the woods just yet, economists and lawyers following the trade war said.
The 6-3 ruling found that Trump overstepped his executive powers without congressional approval in imposing tariffs under the International Emergency Economic Powers Act (IEEPA), dealing a blow to a president who launched his second stint in office by imposing steep levies on other countries as an economic negotiation tool .
While the decision means tariffs implemented under IEEPA are invalid, Trump was quick to signal that they would be replaced by a ten per cent global tariff under section 122 of the 1974 Trade Act.
Joe Brusuelas, chief economist with national assurance, tax and consultancy firm RSM US LLP, nevertheless called the ruling an “unambiguously good development” for small and mid-size Canadian businesses, especially those in retail and manufacturing.
“The ruling is beneficial to the integrated supply chains in auto manufacturing and food stuffs,” he said in a note. “If implemented, it could cut the 5.96 per cent effect tariff on Canadian goods in half.”
Jim Estill, a serial entrepreneur and the chief executive of Danby Products Ltd, a Guelph, Ont.,-based appliance maker, welcomed the court’s decision as a potential windfall for his company — assuming the Americans pay up. By his math, Danby is owed a $10-million tariff-related refund.
Going forward, he expects prices in the U.S., which represents the company’s largest market, could decline for consumers should sales increase. One potential wrinkle, he said, would be if American retailers that carry Danby products start asking him for a refund.
“I see this as the start of a process,” Estill said. “ I am not expecting a cheque by Tuesday.”
Mark Warner, principle of MAAW Law, said that while the Supreme Court ruling could be a boon for some companies, it does not apply to tariffs on autos, steel, aluminum, lumber and some copper products, which are the most significant tariffs currently impacting Canada.
“It’s kind of a victory,” he said. “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.”
More than 85 per cent of Canada’s other exports were already exempt from these tariffs under the Canada-United States-Mexico Agreement (CUSMA), said Matthew Holmes, executive vice president and chief of public policy at the Canadian Chamber of Commerce.
That at least means that if CUSMA were to break down as it comes up for review this year, the IEEPA tariffs would not come into effect.
That said, Holmes warned the Supreme Court ruling could mean increased uncertainty, as well as the possibility of even more tariffs from the Trump administration through “a number of other blunt instruments” which could create more disruption for Canadian businesses.
“(The U.S. administration is) very dedicated to trade through a tariff lens,” said Holmes. “They’ve been pretty clear that, regardless of the court ruling, they plan to continue on that path.”
Section 122, under the U.S. Trade Act, allows the president to place a tariff of up to 15 per cent for up to 150 days, and only requires Congressional approval for it to be extended for a longer period of time.
“We’re also initiating several Section 301, and other investigations, to protect our country from unfair trading practices of other countries and companies,” Trump said when he announced the new 10 per cent global tariff under section 122 during a news conference at the White House. “The numbers could be far greater than the hundreds of billions we’ve already taken in.”
Section 301 under the Trade Act allows for broad, country-specific tariffs to respond to certain foreign trade practices and doesn’t require approval from Congress either, though they could take a year-and-a-half before they can be put in place.
There are also other sections that could be used, Holmes said. Section 232, under the Trade Expansion Act, which was used to justify tariffs against Canadian steel and aluminum, requires a study of a specific import to assess whether any uncompetitive trade practices are at play.
Section 201 requires a petition from an industry group to protect its sector, but requires a term limit and would take about six months to be implemented, Holmes added.
“There’s only so many of these they’ll be able to put in place,” he said. “But there’s also going to be this cloud hanging over business with the U.S. for many months to come.”
Holmes said it is vital that Canada continue to diversify trade with other countries, which can provide more certainty to businesses during this time.
• Email: slouis@postmedia.com
— With additional reporting from Joe O’Connor