The U.S. Supreme Court ruled on Friday that U.S. President Donald Trump’s tariffs on Canada and other countries are illegal — but that doesn’t mean an end to Trump’s global trade wars.
The ruling only affects the tariffs Trump imposed under emergency powers, including his so-called “reciprocal” tariffs and separate duties on Canada related to fentanyl. It also means Trump can not use that authority to threaten or impose additional tariffs every time he sees fit.
As Trump himself identified after the ruling, the choice doesn’t address several other tariffs on specific sectors like steel, aluminum and autos, which is able to remain in place. Those were imposed under a U.S. law referred to as Section 232, which stays available for Trump to make use of in the longer term.
Trump also said he’ll use a unique authority to impose a world 10 per cent tariff, effectively replacing the worldwide baseline tariff rate that was truck down Friday.
Questions also remain on whether the federal government will likely be forced to refund the additional costs paid by American businesses on account of the now-unlawful tariffs, which the court’s ruling doesn’t address.
“This really guarantees more uncertainty and sure more tariffs down the road, each globally speaking but possibly for Canada as well,” said Matthew Holmes, executive vice-president on the Canadian Chamber of Commerce.
“It’s actually not the tip of this never-ending tariff story. It’s just a brand new chapter.”
Here’s what to know concerning the decision and what happens next.
What does the ruling strike down?
The case involved a pair of lawsuits that challenged Trump’s use of the International Emergency Economic Powers Act (IEPPA), a 1977 law that enables the president to administer economic transactions during an emergency.
Trump had argued the law’s language of regulating imports allowed him to impose tariffs as a response to 2 emergencies he declared early last 12 months: one about fentanyl trafficking from Canada, Mexico and China, and one other regarding historic trade deficits with dozens of other countries.
Canada faced a 35 per cent rate under those fentanyl tariffs on the time of the Supreme Court’s ruling, with a lower 10 per cent rate on energy and fertilizer products like potash.
Nonetheless, Trump had exempted goods that were traded under the Canada-U.S.-Mexico Agreement on free trade (CUSMA), meaning those goods faced no tariff in any respect.
Prime Minister Mark Carney has repeatedly identified that roughly 85 per cent of Canadian exports to the U.S. fall under that CUSMA exemption.
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“What this does for domestic entities is type of interesting, because we lose that preferential access under that zero per cent rate,” said Robert Glasgow, a world trade lawyer based in Toronto.
“But complying with getting that zero per cent rate, getting those rules of origin and the certificates of origin, may be costly and difficult. … So those compliance costs now come down.”
Trump has imposed a series of other, sector-specific tariffs on several industries using Section 232 of the U.S. Trade Expansion Act, which allows the president to deal with “excessive” foreign imports deemed a risk to national security.
The law requires the U.S. Commerce Department to research those imports and reach a conclusion justifying the tariffs, which may take months to finish.
Section 232 tariffs have been imposed on steel, aluminum and copper at a rate of fifty per cent; automobiles, heavy trucks and auto parts not compliant with CUSMA at a 25 per cent rate; and a few furniture, kitchen cabinets and vanities at 25 per cent.
A ten per cent tariff was also imposed on softwood lumber under Section 232, on top of existing and separate anti-dumping duties.
All of those tariffs remain in place despite the Supreme Court decision, and Section 232 stays a tool that Trump can use in the longer term.
How else might Trump impose tariffs?
Trump said Friday he would sign an executive order imposing a ten per cent global tariff under Section 122 of the U.S. Trade Act “over and above our normal tariffs already being charged.”
The law allows presidents to deal with trade deficits with tariffs, but only as much as 15 per cent and for not than 150 days, unless Congress extends the deadline.
Trump also said his administration was initiating “several” investigations under Section 301 of the Trade Act. That statute is analogous to Section 232 but tasks the U.S. Trade Representative with those probes.
It has been utilized by Trump and other presidents previously to go after countries like China particularly for “unfair” trading practices.
Trump suggested he may go even further than financial barriers on trade, including possible complete embargos on imports, arguing the court had given him the authority to accomplish that.
“Now the court has given me the unquestioned right to ban all styles of things from coming into our country, to destroy foreign countries — a far more powerful right than many individuals ever thought we even had — but not the fitting to charge a fee,” he said. “How crazy is that?”
Glasgow said before Trump’s remarks that the administration won’t be stopped by the court’s decision.
“It’s not the tip of the war,” Glasgow said. “There’s still plenty of conflict left … and I believe that they’re going to try to seek out every underhanded trick they will to attempt to impose more and greater tariffs.”
The ruling leaves one major query unanswered: whether American businesses that paid the additional tariff costs will likely be refunded.
“We’ve taken in a whole bunch of billions of dollars — not hundreds of thousands, a whole bunch of billions of dollars,” Trump said.
“Wouldn’t you’re thinking that they’d have put one sentence in there saying (either) keep the cash or don’t keep the cash? I assume it has to get litigated for the subsequent two years.”
The Penn-Wharton Budget Model on the University of Pennsylvania projected Friday that the U.S. government has collected US$164.7 billion in revenue from the IEEPA tariffs alone, accounting for 52 per cent of all customs duties since last January.
Several large and medium-sized businesses, including Costco, have already sued to make sure they’re refunded within the event of the tariffs being struck down.
We Pay the Tariffs, a coalition of small U.S. businesses that signed onto the Supreme Court case, launched a signature collection campaign moments after Friday’s ruling to appeal to the federal government for refunds.
“The administration’s only responsible plan of action now could be to determine a quick, efficient, and automatic refund process that returns tariff money to the companies that paid it,” the group’s executive director Dan Anthony said in a press release.
“Small businesses cannot afford to attend months or years while bureaucratic delays play out, nor can they afford expensive litigation simply to recuperate money that was unlawfully collected from them in the primary place. These businesses need their a refund now.”
Lawyers acknowledged during November’s oral arguments within the Supreme Court that refunding the tariffs would create a “mess” for the federal government — something Justice Brett Kavanaugh highlighted in his dissenting opinion Friday.
“The mechanism there can be to work along with your U.S. customs broker or U.S. council to file refund requests with U.S. Customs and Border Patrol,” Glasgow said.
Because that mechanism will not be specified by the court decision, he continued, “that is going to need to be a case-by-case try and retrieve the cash.”
—with files from Global’s Touria Izri