Canada ‘not out of the woods’ yet after court rules against some of Trump’s tariffs

Prime Minister Mark Carney and U.S. President Donald Trump engage in a meeting at the White House in Washington, D.C., Tuesday, May 6, 2025. THE CANADIAN PRESS/Adrian Wyld

While Ottawa welcomed a U.S. federal court ruling that would block President Donald Trump’s fentanyl-related tariffs against Canada, experts say local businesses are “not out of the woods” yet -- especially as an appeals court paused that decision Thursday.

The ruling by the lower court on Wednesday would halt the sweeping “Liberation Day” tariffs Trump imposed on around 90 countries in April, along with the economywide duties affecting Canada and Mexico the month prior, when the president declared an emergency at the northern border related to the flow of fentanyl.

The original decision had said Trump does not have the authority to wield tariffs on nearly every country through the use of the International Economic Emergency Powers Act (IEEPA) of 1977 -- a national security statute that gives the president authority to control economic transactions after declaring an emergency.

The U.S. Court of International Trade had given the U.S. government up to 10 days to comply with the order and remove the tariffs.

But the Trump administration filed a notice of appeal soon after the ruling came down from a three-judge panel, which said “any interpretation of IEEPA that delegates unlimited tariff authority is unconstitutional.”

The Court of Appeals for the Federal Circuit temporarily paused that decision, keeping the levies in place for now as the Trump administration fights the order.

Toronto lawyer Sean Stephenson of Dentons, whose practice focuses on international trade and sanctions, called the original ruling a “well-reasoned decision” and a “setback” for the Trump administration.

“Relief could potentially come down the line, and we’re talking months not years here,” said Stephenson.

“We are advising importers that have been affected to start gathering your transaction documents ... If the appeals are successful after everything is exhausted, you could be filing a claim for a refund.”

But he cautioned that “nothing changes overnight” as a result of the ruling, especially while the appeal process unfolds.

The plaintiffs have until June 5 to reply to the Trump administration’s appeal of the decision.

Stephenson added it’s very likely the case could make its way up to the U.S. Supreme Court.

“I would tend to agree that we’re not out of the woods here,” said Stephenson.

Business groups in Canada said they didn’t feel the original ruling brought any fresh certainty in the immediate term.

The Canadian Chamber of Commerce said that “ultimately, the end of this trade war with the U.S. will not come through the courts” but rather through a new negotiated agreement “that is trusted and respected by all involved.”

The group pointed out that the original ruling does not affect all tariffs applied on goods imported into the U.S. from Canada, including steel, aluminum and automobiles. Trump used different powers under the Trade Expansion Act of 1962 to enact those duties.

“We will leave this decision to work its way through the United States courts system,” said chamber president and CEO Candace Laing in a statement.

“Currently, there remains sectoral tariffs as well as other trade barriers on the table. Businesses in Canada and globally are awaiting a real and complete reprieve from trade disruptions, looking for lasting security, stability and resilience.”

Goldy Hyder, president and CEO of the Business Council of Canada, said the focus should be on renewing and extending CUSMA “to provide stability and strength to all three economies.”

“Businesses across North America crave certainty and predictability and right now they have neither,” he said in a statement.

“The fundamental challenge business leaders face today is shifting trade goal posts, which will continue to be a challenge as this process plays itself out in court.”

Meanwhile, RBC president and CEO Dave McKay told analysts on a quarterly earnings conference call Thursday that the lower court’s ruling helps set the stage for a renegotiation of CUSMA in the coming months.

“While these short-term reciprocal tariffs appear to be illegal, it doesn’t mean that we have an overall extended agreement with the United States on the future of trade,” he said.

“I still don’t think we’re shaking the overall uncertainty level just because of that ruling last night, but it helps.”

Even if the lower court’s ruling is eventually upheld, Stephenson said Trump could potentially explore a number of alternative avenues to reimpose tariffs against Canada and other countries that were ruled unconstitutional under the emergency justification.

“There’s various other legal levers that the Trump administration could pull to put these tariffs back on the map,” he said.

“What we have seen with the Trump administration is that they are less concerned with the idiosyncrasies of the law and process and more concerned with the outcome. So for them, they set the outcome and then sort of work backwards as to, ‘Well, how are we going to do this?”’

This report by The Canadian Press was first published May 29, 2025.

Written by Sammy Hudes, The Canadian Press