James Moore: America’s tariff turning point

Former White House trade advisor Kelly Ann Shaw breaks down President Donald Trump increasing global tariffs and how this could impact trade worldwide.

James Moore is a former federal cabinet minister under prime minister Stephen Harper, and is a contributing columnist for CTVNews.ca.

When it comes to where Canada is positioned regarding U.S. President Trump’s tariff and trade policies, it seems increasingly clear that time is on Canada’s side. That is a difficult thing to assert when I know that our business and investment interests, consumer confidence, trade-dependent firms and their workers are all craving stability in the Canada-U.S. relationship on trade and tariffs.

But it seems the landscape may be shifting in Canada’s interests when we analyze last week’s U.S. Supreme Court majority decision on President Trump’s tariff policy approach and the economic and political landscape that is tilting against the Trump agenda.

It has been nearly a week since the 6-3 majority decision of the U.S. Supreme Court to strike down President Trump’s use of the International Economic Emergency Powers Act (IEEPA) to impose tariffs at his discretion.

After several justices of the court seemed skeptical and dubious of the Trump administration’s arguments in November in defence of the president’s use of the IEEPA tariff powers, the ruling that President Trump was acting unconstitutionally was not entirely unexpected.

However, one consequence of the decision was the acceleration of the erosion of public confidence in the tariff policy broadly and the credibility of President Trump personally when it comes to his handling of the economy. And make no mistake, if Donald Trump’s first and second term have any overarching signature policy emphasis, it is tariffs and the president’s obsession with their use as a force for economic renewal, reorganization, government revenue and flexing tactical political strength abroad.

Whatever credibility Trump may have had on this front has now been shattered by the court and the continuing collapse of public support for his policy.

This decision is not the final act in the tariff drama – not by a long shot. In fact, the decision injected new uncertainties going forward. The decision did not provide clarity on whether the thousands of firms who have collected and paid more than $133 billion in tariffs will be reimbursed by the federal government.

Federal Express isn’t waiting around for the administration to play nice and refund their payments and have chosen to sue the U.S. government for a “full refund” of the money they have paid in tariffs. FedEx says that when the Trump IEEPA tariffs were in effect, they imported goods from countries subject to the act and that they “paid IEEPA duties to the United States and thus [has] suffered injury caused by those [unlawful] orders.”

Domino effect

This is the first of likely many lawsuits that could pour in seeking compensation for President Trump’s unlawful trade policy. In fact, prior to the IEEPA ruling, Costco, motorcycle giant Kawasaki, Japanese auto parts supplier Yokohama Tire, cosmetics giant Revlon, canned food seller Bumble Bee and others had already begun legal action against the policy, and they can be expected to both ramp up their efforts and be joined by new allies for remediation from the Trump tariff failure.

The domino effect of the court’s ruling doesn’t stop there. The potential tariff repayments and the loss of forward revenue from the tariffs could lead to a significant spike in pressure on the U.S. Treasury’s revenue that was expected to finance nearly two-thirds of the so-called “One Big Beautiful Bill Act.”

The lost tariff revenue effectively guts the financing of the signature Trump tax policies of time as president, from the raising of the cap on state and local tax deductions for families, the tax deduction for tips, overtime pay, auto loans and the creation of the “Trump Accounts” for parents to create tax-deferred investment vehicles for their kids and more.

‘This is a mess’

The tariffs were also the basis of the funding used for “SNAP benefits” (food assistance for the most in need) and increases in funding for law enforcement, most notably increasing the budget of the Immigration and Customs Enforcement (“I.C.E.”) from roughly US$10 billion to over US$100 billion by 2029.

So, to put it bluntly, this is a mess. The IEEPA tariffs were unconstitutional but highly lucrative. And the revenue raised from the tariffs formed more than two-thirds of the funding for much the Trump agenda, and now everything is in doubt going forward, and, worse, funds already collected are going to have to be returned to those who collected the unconstitutional tariff.

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Yes, this is an awful mess. The administration knows this, which is why they will scramble in the coming weeks to try to backstop the revenue gap by re-creating a patchwork of new tariffs under alternative statutes. The Section 232 tariffs that are supposed to be imposed on a rationale of national security interests could be ramped up further. They are already in effect and punishing Canada’s aluminum, steel, copper, lumber and auto sectors.

Section 301 tariffs that are meant to confront anticompetitive trade practices — and are currently levered against China alone — could be broadened to other jurisdictions. There are also Section 338 tariffs that can be imposed up to a 50 per cent tariff against countries that are deemed to have discriminated against U.S. commerce. And there are Section 122 tariffs that are time limited — up to 150 days — for trade balance to protect currency manipulations that could be invoked.

So far, President Trump has announced a global tariff of 10 per cent, which he quickly changed to 15 per cent. However, under the order that came into force on midnight on Feb. 24, the rate was set back to 10 per cent without any explanation. The measures are also temporary as they sunset after 150 days unless they are legislated by Congress – which is not going to happen.

Carsten Brzeski, an analyst with investment bank ING described the actions as “simply adding to the chaos and mess.” The chaos and mess and uncertainty are likely to continue as President Trump scrambles to find his footing in the new tariff policy world.

For Canada, the bright spot is this: 89 per cent of Canadian exports to the United States in December were not charged with tariffs because they are compliant with the rules of origin requirements in the Canada United States Mexico Agreement (CUSMA), according to RBC Economics. Consequently, that leaves IEEPA tariffs only effective on less than 5 per cent of exports to the U.S. and Canada faces an average effective tariff of 3.1 per cent – the lowest of all major U.S. trade partners.

However, the review of CUSMA for later this year, coupled with the scramble to replace the IEEPA revenue to finance President Trump’s “One Big Beautiful Bill Act” ahead of this fall’s midterm elections should have Canadians anxious for what President Trump may do in response to the collapsing trade and tariff policies around him.

Americans seem to have had enough

The optimism on this front can be seen in the public opinion research of the American public. They seem to have had enough of the tariff and trade chaos. We may finally have reached the inflection point that we have been hoping for since last year when President Trump implemented these policies after his inauguration last January.

Consider these data points:

• A Washington Post poll taken between Feb. 12-17 (before the Supreme Court ruling on the IEEPA tariffs) found that 64 per cent of Americans disapprove of President Trump’s tariffs. Only 34 per cent approve.
• A PBS News/NPR/Marist poll found that 53 per cent of Americans say the “Personal Impact of Trump’s Policies” have been negative. Only 30 per cent say their lives have improved because of his agenda.
• Just 32 per cent of Americans now say that President Trump has had the right priorities, while 68 per cent say he hasn’t paid enough attention to the country’s most important problems according to a CNN poll taken between Feb. 17-20. As a result, Trump’s job approval among all adults sits at 36 per cent.

Amid this chaos and uncertainty, what is Canada to do? Keep calm. Continue to methodically build the network of alliances (in business, labour, congress, state legislatures, thought leaders) in the United States necessary to ally with Canada and meaningfully push back against any threat to hollow out or end the CUSMA agreement.

Respond at home through public policy, investment and trade initiatives that takes advantage of global market opportunities beyond the United States that are on offer to Canada. All this while allowing for the politics of the United States to catch up to the economic reality of the debris of the collapsing Trump tariff policies to take shape.

And, perhaps most of all, keep moving tirelessly forward on pro-growth trade and investment policies that will invite investment, create Canadian jobs and prepare Canada for the new relationship with America that is on the horizon after President Trump eventually leaves office.

Brighter days are ahead, voters will exhaust of the chaos, and time is on our side.