With a large chunk of Donald Trump’s tariffs in potential legal jeopardy, trade experts and business groups say Canada won’t benefit as much as other countries if the levies are gone for good.
The reasons? A court ruling only struck down one class of tariffs, the Trump administration has already appealed the decision to the Supreme Court, and there are plenty of other mechanisms for the U.S. to target imports.
“I think the Canadian negotiators are not relying on the U.S. courts, including the U.S. Supreme Court,” said veteran trade lawyer John Boscariol, head of the international trade group at McCarthy Tetrault.
Last week’s federal appeals court ruling only applied to Trump’s broad-based “Liberation Day” tariffs issued under the International Emergency Economic Powers Act (IEEPA). While Canadian exports to the U.S. theoretically face a 35-per-cent tariff under IEEPA, the vast majority of goods Canada ships to the U.S. are exempt under the Canada-U.S.-Mexico Agreement on trade. Some estimates put the proportion of Canadian goods entering the U.S. tariff-free as high as 90 per cent.
As for the sector-specific tariffs, targeting products such as steel, aluminum, copper and automotive parts, they have been levied under Section 232 of the U.S. Trade Expansion Act, a lengthier, more painstaking process, pointed out Matthew Holmes, policy director for the Canadian Chamber of Commerce.
“The 232s are the ones we’re hearing about from our members,” said Holmes. “And those won’t go away regardless of this court ruling.”
Tariffs imposed under Section 232 require a deeper investigation by U.S. trade officials looking at market conditions in specific sectors of the U.S. economy. There are, simply put, more hoops to jump through than what are imposed by tariffs issued under IEEPA, Holmes said.
Still, he said if the IEEPA tariffs are tossed out by the U.S. Supreme Court, Trump will likely just rely more heavily on Section 232 or other legal mechanisms to get his way.
Along with the federal appeal court ruling being a high-profile legal repudiation for his administration, there are many other reasons Trump is hoping to get the decision overturned: The U.S. Customs and Border says it had collected more than $72 billion in IEEPA tariffs through Aug. 24.
“We’re talking about hundreds of billions of dollars potentially in refunds affecting thousands and thousands of importers,” said trade lawyer Luis Arandia, a partner with Indiana-based law firm Barnes & Thornburg. “Unwinding all that will be the largest administrative effort in U.S. government history.’”
One set of IEEPA tariffs targeted almost every country on earth after Trump declared that the United States’ massive and persistent trade deficits amounted to a national emergency. Another was aimed at Canada, China and Mexico and Trump claimed it was meant to counter the illegal flow of drugs and immigrants across U.S. borders.
But a specialized federal trade court in New York ruled in May that the president overstepped his authority by ignoring Congress and imposing the IEEPA tariffs. The U.S. Court of Appeals for the Federal Circuit last week largely upheld the trade court’s decision, though it also ordered the lower court to re-consider whether there was any legal fix short of striking down the tariffs completely.
The appellate judges also paused their own ruling until mid-October to give the administration time to appeal to the Supreme Court — something that it did on Wednesday.
Even if the Supreme Court tosses out the IEEPA tariffs, Trump’s administration has repeatedly shown its contempt for other court rulings, so there’s not necessarily any guarantee it would obey this one, argued Flavio Volpe, CEO of the Canadian Auto Parts Manufacturers’ Association. It’s something, said Volpe, which is almost unprecedented in modern times.
“Everybody under 80 years old that has enjoyed peace and prosperity in this shared market economy has no experience with the President of the United States discounting or dismissing the rule of law,” said Volpe. “This is very strange for everybody. This is an HBO movie.”
With files from Star wire services
