Does striking down Trump’s ‘emergency’ tariffs make it better or worse for Canada?

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Carlo Dade is director for international policy and the New North America Initiative at the School of Public Policy at the University of Calgary.

The U.S. Supreme Court has upheld lower-court rulings on President Donald Trump’s use of the International Emergency Economic Powers Act, confirming that Mr. Trump’s usage of such powers to impose tariffs at will is unconstitutional and must end.

Canada’s long nightmare over U.S. tariffs is poised to change. But whether that is for better or worse depends on who within Canada we are talking about – which industry and, by extension, which province.

U.S. Supreme Court rules against Trump’s use of emergency powers to impose tariffs

Most of the tariffed Canadian exports come under a different law and are unaffected by Friday’s ruling. But the ruling is significant for this country nonetheless. What is clear from the data is that what has been a shared, unifying, national problem for Canada will now become more of a fragmented, regional one.

This change in the effect of U.S. tariffs will require new policy approaches by Canada, including different provincial responses to address different needs at home and in the United States.

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The questions before the U.S. Supreme Court are complicated, but the central question is: Has Congress, which has the sole power to impose tariffs, delegated this power to the President in a way that amounts to an abdication of its responsibility?

The powers that the President has come to exercise are, literally, the power to tariff any item, at any amount, for any duration, for any reason he chooses. This is done under the pretext of declaring an international emergency, something that the President alone defines.

Worse, the ability to credibly threaten to impose tariffs at will does more damage than the actual tariffs.

A fixed, predictable tariff can be managed. But the constant threat of a tariff that can appear, rise, fall or disappear at any time for any reason creates uncertainty that negates a business’s power to adjust, and is hence more damaging.

This weaponized uncertainty has been the primary tool of the Trump administration to advance U.S. trade, political and security interests. In the short run, the knowledge that Mr. Trump has this power and is willing to use it, even when U.S. interests are harmed, has been effective in forcing concessions from other countries.

The “emergency” tariffs do not currently affect Canada much because products compliant with the United States-Mexico-Canada Agreement, or USMCA, are exempt. But there is nothing in the agreement itself that protects Canada in this way. Such an exemption was at the discretion of Mr. Trump.

The presidential power behind the emergency tariffs looms like a pall over this country and the impending trade talks with the U.S. It is good that the Supreme Court has ruled against those tariffs.

But if the Trump administration loses its ability to use the International Emergency Economic Powers Act to impose tariffs to achieve economic, political and revenue objectives, it will turn to other powers. Of those powers, the most likely to be used more frequently is one already used increasingly: Section 232 of the 1971 Trade Act, known colloquially as “national security” tariffs, and, in Canada, as steel and aluminum, auto and lumber tariffs.

Over two administrations, Mr. Trump has launched 21 Section 232 investigations, found cause to impose tariffs in all but one case and imposed tariffs in the majority of other cases.

Section 232 tariffs take time to impose, are limited and are not a threat effectively communicated by a social-media post. The Commerce Department must define goods to be investigated, and they must be related; no blanket “everything is a threat” investigations here. The investigations take months, and there is public comment.

This difference is hugely important. Businesses and provincial governments have time to prepare for a limited threat.

But who will have to prepare is a more interesting story. With the use of Section 232 tariffs so far, the uneven distribution of their impact has already been felt. It will get worse.

For all completed and pending Section 232 investigations from the Trump administration, the burden falls most heavily on various industries in five provinces.

As a share of the province’s total exports to the U.S., Nova Scotia (39 per cent), Quebec (33 per cent), Manitoba (29 per cent), British Columbia (27 per cent) and Ontario (24 per cent) see the biggest potential hit from Section 232 tariffs. For the rest, it’s less t10 per cent.

Sectors affected include pharmaceuticals, lumber, trucks and jet engines, which all have uneven regional distributions. Canada’s tariff response will thus shift accordingly.

Provinces that face a smaller Section 232 hit will have more resources and capacity to help the fewer number of companies needing assistance. The opposite will be the case in provinces facing a larger hit.

Also, provincial trade policy toward the U.S. will diverge. Provinces with products subject to 232 tariffs will focus efforts on having products removed from the list or exemptions granted. Other provinces will devote resources to keeping products off of future 232 lists. This is not a united “Team Canada” approach.

Clearly, what has been a unifying national threat – tariffs on every product from every province that Canada sends to the U.S. – is poised to change.

Editor’s note: This article has been updated to correct the name of the International Emergency Economic Powers Act.