Court ruling shook Washington, but Canada’s tariff headache stayed firmly in place
The United States’ Supreme Court dealt a rare, stinging setback to president Donald Trump’s trade agenda, ruling that he overstepped federal law when he slapped broad tariffs on a range of foreign imports using emergency powers. However, for Canada’s exporters – and the lenders and brokers who serve them – the decision leaves most of the pain in place.
Trade lawyers and economists said the judgment is unlikely to unwind the core architecture of Trump‑era tariffs.
Duties on Canadian steel, aluminum, lumber and automobiles are untouched, because the case focuses only on levies imposed under the International Emergency Economic Powers Act (IEEPA), not the tools Washington usually used for sector‑specific trade measures.
So even as legal limits tightened around the White House, the trade war itself looks set to grind on.
Canada’s leverage improves, but exposure remains
For Canada, the immediate market story lies in what did not change. Tariffs on autos, steel, aluminum, lumber and some copper products have been imposed “on other grounds (national security, or countervailing duties against purported subsidies)” and therefore were untouched by the ruling, CIBC economist Avery Shenfeld said.
Those sectors remained under pressure, with downstream effects on construction costs, development timelines and financing risk across housing and commercial real estate.
At the same time, Shenfeld said the decision removes a key threat hanging over the upcoming review of the Canada–US–Mexico Agreement (CUSMA). The vast majority of Canadian exports are already entering the US duty‑free under CUSMA, qualifying for exemption from a 35% fentanyl‑related tariff on imports.
The Court’s decision, he said, “does remove the threat of that 35% tariff being applied if the US opts to withdraw from the USMCA,” putting Ottawa in a stronger negotiating position as talks approach.
Shenfeld also pointed to other possible avenues the administration could test, including declaring a “balance of payments emergency” and invoking a 15% tariff under an obscure statute. He noted that such a move could be challenged in court and would require congressional approval for any extension beyond 150 days.
Tariffs likely to stay
Kenneth Katkin, a law professor at Northern Kentucky University’s Chase College of Law, said the Court was always likely to be skeptical of the emergency‑powers rationale.
“A lot of the attention that he's been getting is because of his reliance on a statute called the International Emergency Economic Powers Act,” Katkin said.
“His reading is pretty implausible, but that's a statute that says if there's an international emergency or crisis that comes up very suddenly, then the President can take economic sanctions against other countries. I think that's a very implausible reading of that statute, and the court really should strike that down."
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Katkin said the IEEPA approach looked more like a shortcut than a tailored response to genuine trade disputes.
“Some trade disputes exist, and some of them are more bona fide than these kinds of phony emergencies that he's been cooking up under the International Emergency Economic Powers Act,” Katkin said.
“But I think, I think he wanted to rely on the International Emergency Economic Powers Act because he was basically taking the position that anything that he says is an emergency is an emergency.
“So I think he was thinking that that would give him more power. But I do think that there's overreach there.”
Even with IEEPA curbed, Katkin said other tools were still available.
“There are other statutes out there that actually deal more directly with trade disputes and with the president's power to use tariffs in response to particular trade disputes,” he said.
“I think those would be a stronger basis for supporting some tariffs, but only when there is a bona fide trade dispute.”
Justice Brett Kavanaugh, in dissent, warned that the fallout could be complex, especially around tariff refunds.
“The Court says nothing today about whether, and if so how, the Government should go about returning the billions of dollars that it has collected from importers,” Kavanaugh said. “But that process is likely to be a ‘mess,’ as was acknowledged at oral argument.”
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