This past March, former President Donald Trump went one step further by imposing 25 percent economywide tariffs on Canada. He defended this decision by claiming a national emergency because of the influx of deadly fentanyl pouring in through our northern border. That decision has sparked fears beyond the US border, as officials in Canada are now preparing for short-term impacts and long-term repercussions. The tariffs only cover imports that don’t meet the requirements of the Canada-U.S.-Mexico Agreement (CUSMA). This accord was designed to facilitate trade among the three countries.
As you’ll recall, Trump tried to sell the imposition of these tariffs as a measure directed at fighting our fentanyl crisis. He rightly defined this crisis as a national security concern. Opponents contend that the rationale is hairbrained. Plus, they argue, U.S. government data already demonstrates that next to no fentanyl is intercepted at the northern border—even relative to the southern border with Mexico. This inconsistency calls into question the legality of the tariffs, as well as their stated purpose and intent.
PM Mark Carney has cautioned Canadians that all tariffs are not necessarily dead. This warning note comes despite appearances that relations between Canada and the U.S. have begun to cool after his visit to the White House in October. Carney’s efforts to smooth relations come in the wake of Trump’s termination of trade negotiations, which he claimed were being unduly influenced by Canadian attempts to sway the upcoming U.S. Supreme Court hearing.
As we have written before, this Supreme Court hearing carries major implications for Trump’s tariff agenda. It will combine two cases: one challenging what are commonly known as Trump’s reciprocal tariffs and another addressing the fentanyl-related duties imposed on Canada, Mexico, and China. Lawyers for the targeted companies plan to contest the tariffs levied through IEEPA. In their complaint, they assert that this law was never meant to provide the president with such expansive power to change trade duties.
As the U.S. Constitution so blatantly states, the power to tax and tariff is clearly Congressional. This important nuance might be fundamental to the court’s deliberations. If the court rules against the fentanyl-related duties, Canada will celebrate a remarkable victory. This decision would be a welcome relief to some of the negative economic impact caused by Trump’s tariffs.
Economists and trade experts such as our friend Carlo Dade have voiced alarm about the collateral effects of Trump’s tariff approach. He argued that keeping the fentanyl tariffs could open up Canada to “anytime, anywhere, anyhow tariffs.” This reality would produce a chaotic and uncertain trade landscape.
“If the fentanyl tariffs stay, then we’re stuck with the anytime, anywhere, anyhow tariffs.” – Carlo Dade
Dade underscored that if Trump wishes to go down a Section 232 regime under trade law, he needs to specify a category first. Then, he must initiate an investigation before he should be allowed to levy any extra punitive tariffs. This is all on top of an already complex and uncertain situation.
In response to Trump’s complaints, Ottawa has responded by appointing an “Fentanyl Czar,” introducing new border security legislation, and increasing aerial surveillance through helicopters and drones. Beyond that, we still need to figure out how effective these measures will be. Yet many outside observers remain unconvinced that these new initiatives will meet U.S. requirements, or that they will be anything more than short-term band-aids.
As these legal arguments move towards the U.S. Supreme Court, Canadian leaders and American companies alike are left waiting with bated breath. That result would do much to either fortify or tear down one of the most prominent planks in Trump’s trade policy aimed at Canada.
