Trump’s new tariffs are dubious tactics that put Carney in a tight spot, trade watchers say

Article content

The central legal question is all about process. Certain retributive tariff powers available to the president require investigation by the U.S. government to substantiate the grievances, including Section 301 tariffs (targeting goods made by forced labour) and Section 122 tariffs (temporary surcharges for “international payments problems”).

Article content

Section 338, however, is vague on whether an investigation is needed before implementation.

Article content

The statute says the U.S. International Tariff Commission (ITC) must continuously monitor global trade for unfair practices and advise the White House accordingly, suggesting the ITC should inform the president of any discriminatory findings, which did not happen in this case. 

Article content

“But it doesn’t actually clarify whether a finding by the ITC is necessary for the president to be able to invoke Section 338,” said Carrillo Obregon, suggesting this is one way the move could be legally challenged. 

Article content

Section 338 is nearly a century old and was largely superseded by Section 301 of the Trade Act of 1974, another anti-discrimination statute. Clark Packard, research fellow for Cato’s Herbert A. Stiefel Center for Trade Policy Studies, said he expects serious legal challenges because of this history.

Article content

Article content

“Whether those (lawsuits) are successful is a different question,” he noted.

Article content

Judges rarely micro-manage trade policy, so the courts may very well defer to the president’s judgment on whether Canada is truly discriminating against U.S. business, Carrillo Obregon said.

Article content

Frustratingly for Ottawa, of course, the White House doesn’t mention that its Section 338 tariffs are being imposed purportedly over auto tariffs and alcohol boycotts that were deployed in Canada only as responses to “USMCA-violating trade policies from the White House,” Packard said.

Article content

Prime Minister Mark Carney said as much late Monday in a statement posted to X, criticizing the move as “the latest in a series of unilateral U.S. trade actions that began with the U.S. imposing a series of tariffs in direct violation of the Canada-United States-Mexico Agreement (CUSMA), the free trade agreement between Canada, the United States, and Mexico.”

Article content

Regardless, any legal challenges over the newest tariffs could take months, if not years, so the more immediate concern is how Ottawa responds. Carney said after Monday’s tariff announcement that the U.S. and Canada had agreed to “intensify” negotiations over CUSMA.

Article content

Article content

“Canada stands ready to engage intensively to address outstanding issues with the U.S. to the mutual benefit of our citizens,” Carney said. He later said Canada “will do whatever it takes” to respond to the new trade taxes.

Article content

But analysts say he needs to tread carefully.

Article content

“Economically speaking, the worst thing would be to sort of retaliate again, because those are tariffs that Canadian consumers would be paying,” said Carrillo Obregon. It would also worsen the tension between the two countries and probably fail to move the U.S. to compromise, he added. 

Article content

But he acknowledged that Carney must grapple with opting for the domestic political payoff of standing up to Trump — and whether it’s worth the geopolitical and economic costs. 

Article content

“Canada should not be bullied into accepting a bad deal. They should stand firm and argue for their interests, which are our mutual North American interest,” said Hale.

Article content

Packard acknowledged that “the Canadian government cannot be perceived as weak in the eyes of Canadian voters.” But he also noted that if he were advising Ottawa, “I would suggest they not retaliate.”

Article content

Any new tariffs on American imports “will be paid by Canadian businesses and Canadian families. It cannot be repeated enough — the tariffs are not paid by foreigners.”

Article content

National Post

Article content

[email protected]

Article content

Article content

Article content