While U.S. President Donald Trump’s sweeping global tariffs were struck down by the U.S. Supreme Court on Friday, experts and economists say the decision is unlikely to bring relief for consumers in Canada.
Hours after the court’s decision on his tariffs, Trump said he was imposing another global tariff of 10 per cent under Section 122 of the U.S. Trade Act, which limits tariffs that address trade deficits to 15 per cent and for no longer than 150 days.
The law Trump used to impose the global tariffs that were struck down — the International Emergency Economic Powers Act (IEPPA) — “does not authorize the President to impose tariffs,” Chief Justice John Roberts wrote in the majority opinion.
Economists have pointed out that the impact of the IEEPA tariffs on Canada has been blunted by the exemptions granted to goods traded in compliance with the Canada-U.S.-Mexico Free Trade Agreement (CUSMA).
According to a report by RBC, around 89 per cent of Canadian exports to the U.S. in December were not charged with tariffs because they’re compliant with rules of origin requirements in CUSMA.
“The ruling will have less impact on Canadian trade than most other countries. Most Canadian exports are already exempt from IEEPA tariffs via an exemption for CUSMA compliant trade,” the RBC report said.
While nearly 90 per cent of the tariffs’ economic burden was borne by U.S. consumers and firms, Canadians have felt the impact of higher prices because of the integrated supply chains between the two countries.
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For example, beer cans use Canadian aluminum and are made into can sheets in the United States. The metal crosses the border several times before it hits the shelves.
Friday’s decision does not affect the sectoral tariffs on key Canadian products, like metals, autos and lumber.
“It’s not material at all for our industry in the aluminum sector because we are under a different section, Section 232,” said Jean Simard, president and CEO of the Aluminum Association of Canada.
Before Trump’s tariffs went into effect last year, some businesses acted proactively, said Concordia University economist Moshe Lander.
“Canadian businesses front-loaded a lot of exports into the U.S. to avoid the tariffs,” he said.
This meant many businesses had built up inventory to avoid price increases for their consumers.
Once prices have been raised, its unlikely that they’ll be reversed, said retail analyst Bruce Winder.
“These new prices have been normalized now,” Winder said.
“Most large retailers don’t lower prices. They might use some of that money for share buybacks, dividends or strategically lower prices or promotions if they see the market going that way. But no one at the top wants to lower prices unless you have a strategic reason to do it. It’s not good for sales and earnings,” he added.
The real impact may be less so on price tags at stores and more on consumer confidence, said BMO Capital Markets senior economist Erik Johnson.
“It’s less likely to have implications on the job market and things that feed into decisions consumers make every day about whether to go out and buy a new car or whether to buy a new home or upgrade or downsize — all those big consumer decisions,” he said.
But Canadian businesses will continue to be on shaky ground with the cloud of uncertainty still hanging over the U.S. trading relationship, Lander said.
“The problem is not just the tariffs themselves. It’s these constant reversals on policy. Businesses that make decisions 30 to 50 years out need to have some degree of clarity,” he said.
“What you don’t need is a White House that takes a decision on a Monday, does a 180 on a Tuesday, doubles down on Wednesday, and then backs away from it entirely on Thursday,” he added.
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