The U.S. Supreme Court's upcoming decision on tariffs could have a significant impact, and it's a hot topic that deserves our attention. The world is watching as President Trump's tariff agenda faces a critical legal challenge this week.
Despite the outcome, Canada is not in the clear. The Supreme Court's ruling will not affect all of Trump's tariffs, leaving Canada vulnerable to ongoing economic pressures.
This week, the Court will hear arguments from businesses and states challenging Trump's use of the International Emergency Economic Powers Act (IEEPA) to impose tariffs on nearly every nation. This case combines two separate challenges: one against Trump's reciprocal tariffs and another against fentanyl-related duties on Canada, Mexico, and China.
But here's where it gets controversial... The hearing will not address Trump's expanding use of tariffs under Section 232 of the Trade Expansion Act, which has already hit Canada's key industries hard. Prime Minister Mark Carney has warned that some level of tariff is likely to remain, even as Canada negotiates with the Trump administration.
And this is the part most people miss... While Trump's actions have changed global trade dynamics, nations like Canada are closely watching to see if the president's preferred tariff tool will survive this judicial challenge.
Lawyers representing businesses argue that IEEPA was never intended to give the president such broad powers over tariffs. The U.S. Constitution grants Congress the power to impose taxes and tariffs, and IEEPA only authorizes the president to control economic transactions after declaring an emergency. Notably, the act does not explicitly mention "tariffs."
Lawyers will also argue that even if the Supreme Court allows IEEPA to be used for tariffs, the statute requires a response to an unusual and extraordinary threat, which trade deficits do not represent.
However, the Court's ruling may be split due to the slightly different legal basis for the fentanyl-related tariffs, according to Stanford Law School professor Michael McConnell. The Supreme Court could uphold Trump's fentanyl emergency declaration and, consequently, the economy-wide duties on Canada.
Carlo Dade, director of international policy at the University of Calgary's School of Public Policy, highlights the potential impact on Canada if the Court strikes down reciprocal tariffs but upholds fentanyl duties. In that case, Canada would be in a globally unique and difficult position.
"If the fentanyl tariffs stay, we're stuck with these anytime, anywhere, anyhow tariffs. This weakens us uniquely on the global stage," Dade said.
Trump imposed 25% economy-wide tariffs on Canada in March, declaring an emergency at the northern border related to the flow of deadly fentanyl. These tariffs do not apply to goods compliant with the Canada-U.S.-Mexico Agreement (CUSMA).
U.S. government data shows a minimal amount of fentanyl seized at the northern border compared to the U.S.-Mexico border. Ottawa has taken steps to address Trump's concerns, including appointing a "Fentanyl Czar," introducing border security legislation, and increasing aerial surveillance.
Negotiations with the Trump administration have been challenging, and the president increased duties on Canada to 35% in August, claiming Ottawa's lack of cooperation in curbing fentanyl flow.
Prime Minister Carney seemed to improve bilateral relations during a White House visit in October. He has stated that the CUSMA carve-out for fentanyl-related duties puts Canada in a more desirable position than most other nations, and Canadian officials are focused on mitigating the impact of Trump's sector-specific duties.
However, an Ontario-sponsored advertisement quoting former President Ronald Reagan angered Trump once again, leading him to terminate trade talks and accuse Canada of attempting to influence the Supreme Court ahead of this week's hearing.
Dade emphasizes that Canada will continue to face tariffs regardless of the hearing's outcome. If the fentanyl-related duties are overturned, it could change the crisis caused by Trump's tariffs in Canada. Currently, when Trump changes his mind on tariffs, the entire Canadian economy is affected, and everyone is scrambling to adapt.
"If we move to a 232 regime, the president has to choose a specific category and initiate an investigation. The process must be followed," Dade explained.
Dade also noted that Trump has other tools to impose economy-wide duties on other countries, but those statutes are more limited. Canada must be prepared for any scenario.
"The Americans are rewriting global trade rules, and we're all suffering. We need to come up with alternative solutions," Dade concluded.
The Canadian Press
