Even a win might feel like a loss.
That’s the message from trade experts and Canadian business leaders as the U.S. Supreme Court is set to rule on the legality of a wide swath of Donald Trump’s tariffs as soon as Friday morning.
The court recently added Friday to its calendar as a “non-argument” day, and legal watchers have speculated that means a decision could be coming on the legality of a key plank of Trump’s trade policy, including his so-called ‘Liberation Day’ tariffs.
While most economists and trade experts agree those tariffs don’t directly affect most Canadian exports to the U.S., there’s a bigger potential risk in Trump’s reaction, they say.
If they’re shot down, a vengeful Trump could be tempted to lash out using other kinds of tariffs, or even potentially pulling out of the Canada-U.S.-Mexico agreement on trade, said Matthew Holmes, head of public policy for the Canadian Chamber of Commerce.
“He’s not going to be ‘I just suffered a loss in court. I think I’ll reconsider my entire trade policy’,” said Holmes. “He’s going to double down with the other mechanisms at his disposal.”
The Supreme Court heard appeals late last year of lower court rulings that had declared Trump’s use of the International Emergency Economic Powers Act (IEEPA) to levy tariffs against dozens of countries around the world — including Canada — illegal.
The vast majority of Canadian exports to the U.S. are compliant with CUSMA, and thus have largely been spared from IEEPA tariffs, Holmes said.
“The IEEPA tariffs are egregious … but they haven’t really been affecting Canada significantly,” Holmes said.
In a recent report, TD economist Marc Ercolao said that no matter which way it goes, the ruling will likely affect this year’s upcoming review of CUSMA.
“The jury is out on what the decision will be, but it may have implications for upcoming negotiations,” Ercolao wrote, while suggesting that the majority of the tariff impact on Canada’s economy is already in the rearview mirror.
The head of Canada’s Automotive Parts Manufacturers Association agreed that there’s definitely a risk of Trump lashing out if the IEEPA tariffs are shot down, and said Canadian officials, including Prime Minister Mark Carney, should be measured in their reaction.
“There’s absolutely a risk Donald Trump would do something capricious in the loss,” said APMA CEO Flavio Volpe. “It’s important for Canada to behave in its own best interests. It’s about not taking a victory lap, not celebrating. Let the U.S. stakeholders take the victory lap — they’re the ones who filed this case to begin with.”
Still, Volpe noted, even if the IEEPA tariffs are upheld, there’s still plenty of damage being done to other industries — including steel and aluminum, thanks to sector-specific tariffs issued under national security legislation.
Those other tariffs, said veteran international trade lawyer John Boscariol, could be used to target even more industries.
“They take more time to do than IEEPA. But we’ve already seen them looking to other sectors, like critical minerals and copper,” said Boscariol.
And for the relatively small chunk of the Canadian economy who’ve had to rejig their approach to exports because of the IEEPA tariffs, seeing them shot down would mean more uncertainty, Boscariol added.
“It might be a relatively small group … but it’s significant. Think of all the mom and pop shops who had to go through the rigamarole of proving CUSMA compliance to avoid the IEEPA tariffs,” Boscariol said.
Pulling out of CUSMA because of a court ruling is a long-shot, but given Trump’s often-unpredictable behaviour and late-night social media posting, it’s still entirely possible, Boscariol added.
“It’s always a risk, because he’s completely unpredictable,” said Boscariol. “He has thrown temper tantrums in the past.”
