US president escalates trade war after Supreme Court ruling
US president Donald Trump raised his threatened global tariff on trading partners over the weekend, bumping it to 15% after initially announcing a 10% rate.
Trump had announced the initial tariff rate during a fiery press conference in which he blasted the Supreme Court justices who struck down the tariffs he introduced under the International Emergency Economic Powers Act (IEEPA) last year.
And in a Saturday Truth Social post, he said he was increasing the new rate, hitting out at countries he said had been exploiting the US on trade.
The levy, which Trump said he would impose under Section 122 of the 1974 Trade Act, marks a new escalation in the trade war the president launched last year and casts fresh uncertainty on the global economic outlook.
The Supreme Court’s landmark ruling that most of Trump’s tariffs were illegal (but not levies on Canadian steel, aluminum, lumber and automobiles) was blasted by the president as “disgraceful,” while he dismissed the idea that his new tariffs would prove short-lived.
Under the 1974 Trade Act, the president is permitted to impose tariffs for up to 150 days but would require Congressional approval for an extension after that.
Trump torched that idea. “We have a right to do pretty much what we want to do,” he told reporters.
Five-year Government of Canada bond yields, which strongly influence Canadian fixed mortgage rates, ended the week lower but ticked up on Friday afternoon after Trump's announcement.
Some analysts believe the Supreme Court ruling could set the stage for a quicker pace of Federal Reserve rate cuts this year, an outcome that could have big implications for the Bank of Canada's thinking.
Still, it remains to be seen whether that picture changes if Trump’s new tariff comes into play. Others, meanwhile, aren’t convinced the new tariff will last for long.
But there’s no sign that Trump is prepared to back down on tariffs in the long run, giving the central bank further food for thought as it weighs up its approach to interest rates in the months ahead.
Trump suggested on Friday that he had even stronger tools at his disposal to implement tariffs against trading partners. “We have alternatives,” he said. “Great alternatives.”
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