What can President Trump do on tariffs on Day 1? a Springboard briefing

President-elect Donald Trump has been talking consistently about putting new tariffs on imports from Canada (and other countries) since his election. For businesses on both sides of the border, the uncertainty about what, when and how he might take action is already affecting their plans.

While the US constitution gives Congress authority over tariffs and trade, Congress has consistently delegated some of that authority to the President through legislation. Broadly speaking, that authority has generally been designed to make it possible to negotiate trade agreements that reduce tariffs or to respond to national emergencies like wars (e.g., the Trading with Enemy Powers Act). But these laws do give the President some different legal pathways to impose tariffs on Canada — each pathway coming with its own limits and pathways.

Below is an overview of the potential existing legal avenues that President Trump might pursue to levy tariffs on imports from Canada (and other countries). Using any of these legal authorities to implement across the board tariffs does not have any precedent. It is unclear to what extent Congress (with Republican majorities in the House and Senate) or the courts would provide barriers if President Trump pushes the boundaries of existing legal authorities or if they would authorize new authorities. Congress could also pass new legislation to set new tariffs or, more likely, delegate new authority to the President.

So what can President Trump do when he takes office?

No President has used their trade powers to implement across-the-board tariffs like ones that President Trump is proposing. None of the laws that give the President tariff power are designed for it.

The most likely move will be to implement tariffs through the International Emergency Economic Powers Act (IEEPA). Like it sounds, this law is not written for trade powers and it doesn’t even explicitly mention tariffs. The IEEPA gives the President broad powers to regulate or prohibit foreign transactions to deal with a national emergency. The Act has primarily been used for sanctions of hostile regimes and terrorist entities, but President Trump initiated a process through IEEPA in 2019 to threaten across-the-board tariffs on Mexico (that were ultimately withdrawn). President Nixon used similar legislation — the Trading with the Enemy Act — for tariff surcharges in 1971 to respond to a monetary policy crisis as the Bretton Woods exchange rate system was collapsing. Those 10% tariffs lasted four months.

If President Trump pursues this route, we can expect an Executive Order declaring a national emergency, likely within his early days in office. What that Order points to as the national emergency does matter as the law says the powers can only be used to deal with the threat named in the national emergency. In other words, if Trump cites fentanyl crossing the border, the measures have to be tied in some way to stopping that. Trump has talked about tariffs both as a negotiating threat and as a genuine desire for ongoing tariffs and the way a national emergency is framed will tell us more about Trump’s goals.

Congress has the power to override the President’s declaration of a national emergency but that requires a two-thirds majority. In 2019, the use of the IEEPA to threaten tariffs on Mexico faced pushback from legislators (including Republicans) and legal challenges from affected businesses.

If Trump doesn’t go with the IEEPA, there are other laws that give him different types of Presidential authority to take trade actions. Section 301 of the Trade Act of 1974 and section 232 of the Trade Expansion Act of 1962 are the most likely, and both have been used by Presidents of both parties in recent years.

Section 232 has been used 14 times since 1980, with tariffs on steel, aluminum, critical minerals, oil, auto parts, and other products. President Trump used Section 232 to issue a 25% tariff on steel imports in 2018, with exemptions provided to Canada and Mexico. Section 301 gives broader powers for across-the-board tariffs, and section 301 tariffs currently cover roughly 40% of US imports.

Another more limited option would be to use Section 201 of the Trade Act of 1974. This allows for industry protections for up to four years, and has been used more recently for solar cells and washing machines. Canada and Mexico were exempted from solar cell protections under CUSMA.

Why does Trump want tariffs?

Trying to understand whether Donald Trump is serious when he says something is…challenging. He did spend roughly half his campaign speeches talking about the villain from Silence of the Lambs. But the potential impacts of a trade war with Canada’s largest trading partner are very serious. The Canadian Chamber of Commerce’s Business Data Lab estimates a hit of roughly 2.6% of real GDP. Premier Ford suggested tariffs could cost up to 500,000 jobs in Ontario — six per cent of all jobs in the province.

Whether Trump (and his advisors) find tariffs appealing in their own right or as a negotiating tool, some of the goals he has cited include:

• Changing the US net trade balance with its trading partners (shifting from net exporter to net importer)
• Raising revenues to reduce or replace income taxes
• Force policy response to border control (especially for fentanyl and irregular migration), military spending, or other US interests
• Using “economic force” to push Canada into some sort of economic union or become “the 51st state”

What will happen next?

This situation is likely to shift considerably in the coming weeks and months. If Trump faces legal or political barriers to using the IEEPA (or a different avenue) he is likely to turn to other avenues. The US approach will be informed by both Canada’s response as well as Mexico’s and those of other trading partners. Navigating these issues is likely to crowd out most other issues for federal and provincial policymakers.