The U.S. Supreme Court has dealt a significant blow to former President Donald Trump’s tariff policies by overturning many tariffs imposed last year. This ruling comes as a relief for various sectors within the Canadian economy that were burdened by these tariffs. The decision was announced on a Friday, with six of the nine justices agreeing that the President does not have unfettered authority to impose tariffs at will.
Details of the Supreme Court Ruling
This ruling invalidates a core part of the Trump administration’s trade strategy, which relied on the International Emergency Economic Powers Act of 1977. This law granted the President powers to impose economic sanctions during emergencies. However, the court stated that this law had not been previously used by any president for tariff imposition.
Implications of the Decision
The Supreme Court emphasized that while the federal government does possess the authority to impose tariffs, such power primarily resides with Congress rather than being solely at the discretion of the President.
- Tariffs of 25% on certain products from Canada and Mexico are expected to be suspended.
- Additional tariffs announced on April 2 aimed at over 180 countries are also likely to face scrutiny.
Although these developments signal a change in tariff policy, challenges remain for Canada. Sector-specific tariffs continue to impact imports of steel, aluminum, non-American vehicle content, and softwood lumber. These tariffs were justified by the U.S. under national security concerns, drawing from Article 232 of the Trade Expansion Act.
Current Trade Context
Despite the Supreme Court’s ruling, products that comply with the United States-Mexico-Canada Agreement (USMCA) remain exempt from these tariffs. Approximately 90% of Canadian goods exported to the U.S. enter duty-free, indicating a largely favorable trade relationship.
Potential for Refunds
The court did not address whether companies could reclaim the billions already collected in tariffs by the federal government. Major retailers like Costco have sought legal channels to obtain refunds. Justice Brett Kavanaugh noted that the process for reimbursement could be complicated and potentially chaotic.
According to U.S. government data, over $133 billion in import taxes had been collected as of December last year. The implications of this ruling are likely to unfold over time as businesses assess their next steps regarding contributions made under previous tariff policies.
