OTTAWA — The U.S. Supreme Court issued a blow on Friday to U.S. President Donald Trump’s tariff agenda, ruling he doesn’t have the right to impose sweeping tariffs on other countries using a law intended for national emergencies.

The 6-3 decision spares Canada from the 35 per cent tariffs Trump imposed on goods that aren’t covered by the trade pact between Canada, the U.S. and Mexico.

Trump immediately hit back, however, announcing plans a new 10 per cent global tariff based on a different legal mechanism. 

“Foreign countries that have been ripping us off for years are ecstatic, they’re so happy, and they’re dancing in the streets,” Trump said at a press conference, in which he promised to bring in more tariffs using a variety of other legal authorities. “But they won’t be dancing for long, that I can assure you.”

The decision has no bearing on the authority Trump used to impose national-security tariffs on lumber, copper, the auto sector and steel and aluminum products, which have hit Canadian industries hard. Those levies relied on Section 232 of the U.S. Trade Expansion Act.

Why the president lost

Chief Justice John Roberts wrote the Supreme Court’s ruling, the bulk of which was backed by five other of the court’s nine judges (conservatives Brett Kavanaugh, Clarence Thomas and Samuel Alito disagreed).

The International Emergency Economic Powers Act (IEEPA) gives the president authority to regulate the importation of goods, Roberts wrote, and Trump has used that to justify tariffs set, at his whim, on all imports from countries of his choosing. “Those words cannot bear such weight.”

The decision came down to a straightforward series of ideas:

• Tariffs are taxes.
• For as long as the United States has been a country, the government has treated its power to tax as just about the most important, and that power is ultimately in Congress’s hands. The second law ever passed by Congress was a tariff bill, Roberts pointed out; the first was one about taking oaths of office.
• Congress can delegate some of its taxing power to the president, and it has in many ways. When it does that, it does so clearly. 
• You won’t find any clear authorization to set tariffs in IEEPA, the specific law Trump has invoked.

Hope for certainty

The White House had initially argued that the flow of fentanyl and migrants across the Canada-U.S. border constituted a national emergency, and claimed the IEEPA accords the president sweeping powers to unilaterally impose new tariffs. He used the same powers when he declared his so-called “Liberation Day” tariffs on 180 countries, though Canada was spared from that round.

“The United States Supreme Court’s decision reinforces Canada’s position that the IEEPA tariffs imposed by the United States are unjustified,” Canada-U.S. Trade Minister Dominic LeBlanc said in a statement posted on X. 

The vast majority of Canadian exports, however, were protected from the IEEPA tariffs by a carve-out for goods that move through the United States-Mexico-Canada Agreement (USMCA). 

For Canada, then, the Supreme Court’s decision isn’t so much about immediate respite from the IEEPA tariffs as it is from the uncertainty of being at Trump’s unfettered whims, which Canada’s government often found out about through his Truth Social posts, said Carlo Dade, director of international policy at the University of Calgary’s School of Public Policy. 

“It’s less the tariff itself than the American cudgel, this Tweet of Damocles hanging over our head,” he said. “It’s not, ‘Anything I want, any amount I want, any reason I want, anytime I want.’” 

Trump’s options

Trump has other ways to slap new tariffs on Canada and other countries, but those mechanisms impose greater limits on the president’s power. 

There are five at his disposal. Some, like the Section 232 tariffs on steel and aluminum, can’t be enforced immediately and focus on individual sectors. Others restrict how large tariffs can be, or how long they can remain in effect, said Dade.

The president is using Section 122 of the Trade Act of 1974 to impose his new global tariff. The act lets the president act quickly to respond to “fundamental international payments problems,” but the maximum tariff is 15 per cent, and it must be renewed by Congress after 150 days.

Like the tariffs just struck down, the new levies will not apply to goods from Canada and Mexico that are compliant with the USMCA, according to a fact sheet the White House released on Friday evening.

Trump is also looking into using Section 301 of the same law, which lets his trade representative take action against foreign policies deemed “unreasonable or discriminatory.” First there would have to be a consultation period, and the tariffs expire after four years, though they can be renewed. U.S. Trade Representative Jamieson Greer has already used those words to describe Canada’s Online Streaming Act, and procurement policies in Ontario, Quebec and British Columbia.

Businesses want a refund

The justices didn’t address whether the billions of dollars the U.S. government collected under the IEEPA tariffs should be returned, but their decision has prompted calls for refunds. 

“The administration’s only responsible course of action now is to establish a fast, efficient and automatic refund process that returns tariff money to the businesses that paid it,” said Dan Anthony, executive director of We Pay The Tariffs, a coalition of 800 small U.S. businesses. 

On Friday, Trump said the issue of refunds may also go before the courts.

Penn Wharton Budget Model economists estimate the value of those refunds could be as much as US$175 billion. But getting those refunds into the right hands would be a “mess,” Justice Kavanaugh wrote in his dissent against the decision.

That’s because the money would go to the importer that actually paid the tariff, not the person who ultimately bears the cost, said Lachlan Wolfers, national leader of KPMG Law in Canada.

In any case, Canada’s share of the refunds, if they happen, would be relatively low because of the carve-out for goods covered by the USMCA.

What’s next

Though Trump has one less option for sweeping tariffs, Canada is still grappling with sector-specific levies that have hobbled entire industries and put a damper on investment.

“We recognize that critical work lies ahead to support Canadian businesses and workers who remain affected by Section 232 tariffs on steel, aluminum and automotive sectors,” LeBlanc said in his statement. 

Dade noted that, with Friday’s decision, U.S. tariffs are less a national issue than one felt most in provinces whose industries are still facing levies. And that disparity could change the dynamics within “Team Canada” as the government prepares for the upcoming USMCA review. Ontario and Quebec, home to most of the country’s automakers and steel and aluminum plants, have taken the biggest blow. Alberta has largely dodged the impact of the trade war.  

The trade-policy whiplash over the last year has left businesses struggling to devise long-term investment strategies, as the rules of engagement shift constantly, said Giles Gherson, CEO of the Toronto Region Board of Trade. “It underscores the urgency for a renewed (USMCA) with stable, known trade rules and secure, reciprocal Canada-U.S. trade,” he said in a statement. 

Even if the U.S. chooses to withdraw from that trade deal, the Supreme Court decision will spare Canada the 35 per cent fentanyl tariffs it would otherwise have faced, said Avery Shenfeld, chief economist of CIBC Capital Markets, in a note to clients. “While this isn’t a cure for tariffs facing Canada in targeted sectors… it is nevertheless an improvement in Canada’s negotiating position in the upcoming USMCA talks.”

Alternatively, Trump could use the trade negotiations to try to recoup his losses, said Wolfers.

“When President Trump is hit hard, he, in his own words, tends to ‘fight back 10 times harder.’ And my concern is that [the USMCA] is set up as the vehicle through which that occurs,” he said. 

Update: This story was updated to include additional analysis, response from U.S. President Donald Trump and information released by the White House.