Key Takeaways
- The US Supreme Court’s decision to quash many of the Trump administration’s tariffs does not end the trade threat to Canada.
- Trump has alternative ways to tariff Canadian exports.
- The ruling could still improve Canada’s position at upcoming trade talks.
The US Supreme Court struck down President Donald Trump’s punitive reciprocal tariffs on Friday, but analysts say this does little to blunt the impact hefty tariffs have had on Canadian sectors not compliant with the existing trade treaty.
Experts say the ruling doesn’t remove duties on Canadian auto, steel, aluminum, and lumber products, which weren’t part of the sweeping reciprocal tariffs announced in April 2025. The tariffs were imposed on the grounds of national security, rendering the Supreme Court order ineffective for Canadian exports not covered under the Canada-United States-Mexico Agreement. Further, analysts warn that Trump may have other means to levy tariffs on Canadian exports.
In an act of defiance after the ruling, Trump announced a 10% global tariff on top of existing duties.
Still, the removal of the reciprocal tariffs could boost Canada’s bargaining power at the upcoming CUSMA renewal talks by eliminating the United States’ ability to impose a 35% fentanyl tariff—a threat Trump often repeats—according to a CIBC note to investors. Here are some immediate reactions to the news from economists.
Muted Relief, but May Offer Trade Leverage for Canada
“For Canada, this ruling doesn’t eliminate the most significant tariffs currently in pace, which are on autos, steel, aluminum, lumber and some copper products, which were imposed on other grounds (national security, or countervailing duties against purported subsidies). The vast majority of Canada’s other exports, particularly those with significant domestic content, are entering the US duty free by qualifying for the USMCA [United States-Mexico-Canada Agreement] exemption from the 35% fentanyl tariff.
“But it does remove the threat of that 35% tariff being applied if the US opts to withdraw from the USMCA. The Trump administration could opt to test its powers to impose other tariffs, possibly by declaring a ‘balance of payments emergency’ and invoking a 15% tariff that another obscure piece of legislation seems to allow. So while this isn’t a cure for tariffs facing Canada in targeted sectors (and actually provides more immediate relief to Canada’s competitors in the US that face reciprocal tariffs on all of their exports) it is nevertheless an improvement in Canada’s negotiating position in the upcoming USMCA talks, by removing the leverage the US had with its threatened 35% fentanyl tariff.”
—Avery Shenfeld, chief economist at CIBC Capital Markets
There Are Other Ways the US Can Impose Tariffs on Canada
“The US administration’s response to the Supreme Court’s ruling against IEEPA [International Emergency Economic Powers Act] tariffs could overshadow economic data releases in the week ahead. We have noted before that the government has multiple options to reimpose those measures using other legislation.
“And, in Canada’s case, an exemption for CUSMA compliant trade means most exports were already exempt from IEEPA tariffs with product specific section 232 tariffs (not impacted by the ruling) the main source of tariffs on Canada. We continue to view maintaining CUSMA-related exemptions more important for Canada than the IEEPA ruling itself.”
—Nathan Janzen, assistant chief economist at Royal Bank of Canada
The Ruling Brings More Uncertainty for Canada
“President Trump has had better days. The double blow of the tariff decision and disappointing GDP growth was a part of a deluge of new information that also included higher US inflation and weakening US consumer income growth. I’m stunned by the timing given Trump’s SOTU [State of the Union] speech on Tuesday which will no doubt lash out at the justices as they sit before him in Congress. Perhaps the Court bravely wished to make a point of its independence from the executive branch. The clear message is that Trump must go through Congress instead of bypassing it by executive orders.
“[There are] alternative tariff methods that Trump can pivot toward and he has already repeated his intention to do so in the wake of the decision but without any details. They are less flexible, involve caps and more steps, but they have already been widely used particularly in the case of specific sectors. Regardless, we’re now in a more uncertain phase in terms of what lies next. Multiple sectors could be faced with elevated announcement risk until we find out what the administration plans to do next.”
—Derek Holt, VP and head of capital markets economics at Scotiabank Economics
Little to Suggest the Move Could Spur Canada’s Economic Growth
“For Canada, removing the IEEPA tariffs represents some limited near-term relief, but it would be optimistic to assume it’s permanent or a sustainable upside risk to growth. Canadian exports of product categories affected by industry-specific Section 232 tariffs are down roughly C$15.6 billion through 2025, with all other exports down a similar C$15.3 billion. However, the latter figure is muddied by the changes in oil and gold prices. Excluding these two commodities and products affected by 232 tariffs, flows to the US are down a more modest C$3.7 billion dollars (~1.4% year-on-year). This suggests that even if the 35% tariffs were removed, the potential upside to exports is relatively limited.
“Some level of tariffs beyond the Section 232 levies currently in place remains the base case for Canada as the administration has multiple options for reconstructing its tariff regime. The focus should remain on the review of the USMCA agreement and what market access to the US will look like as Canada looks to diversify its trade partnerships.”
—Andrew Hencic, director and senior economist at TD Economics
