Lead
Canada moved quickly to shift focus toward the Canada–United States–Mexico Agreement (USMCA) review after the U.S. Supreme Court on Friday struck down portions of former President Donald Trump’s tariff measures. The ruling removed the legal basis for the IEEPA-based duties that included so-called “fentanyl” tariffs affecting Canada, China and Mexico, a decision Ottawa said vindicated its view those levies were unjustified. Ottawa nonetheless faces ongoing trade shocks: separate U.S. levies on steel, aluminium and autos remain an open problem, and a formal USMCA renewal decision is due by 1 July. Ministers and business groups warned that negotiations and practical follow-up will be complex even with the high court’s ruling.
Key takeaways
- The U.S. Supreme Court struck down tariffs imposed under the International Emergency Economic Powers Act (IEEPA), including the so-called “fentanyl” tariffs that targeted Canada, China and Mexico.
- Canada had faced tariffs of up to 25% initially on some goods, with some duties later reported at 35% for specific measures; roughly 85% of the trade covered by the “fentanyl” levies was already exempt under a USMCA carve-out.
- The White House has issued a 10% global tariff proclamation designed to replace duties lost when IEEPA was struck down; the White House says the USMCA exemption remains in place under that proclamation.
- Former President Trump posted that he would raise the new global tariff from 10% to 15%; that announcement is a policy claim pending formal implementation.
- Canada’s trade agenda now centers on the USMCA review due by 1 July and the remaining U.S. tariffs in sectors such as steel, aluminium and automobiles.
- Canada currently sells about 75% of its exports to the United States and is pursuing a strategy to double non-U.S. exports by 2035 to reduce dependence.
- Business groups, including Canadian Manufacturers & Exporters, called for a renewed USMCA that restores predictable, rules-based trade to avoid recurring disruptions.
Background
The tariffs at issue were introduced during and after President Trump’s first term and were advanced most recently under a national-security and emergency authority, IEEPA. The set of measures dubbed “fentanyl” tariffs targeted several trading partners and applied levies on broad categories of goods; Ottawa has repeatedly argued these actions were unjustified and harmful to integrated North American supply chains. Historically, North America has been governed by trilateral trade rules since the early 1990s and the USMCA remains the principal framework tying Canadian, U.S. and Mexican economies together.
In practice, the USMCA already exempted a large share of bilateral trade from the most recent emergency levies, leaving about 15% of affected trade subject to duties. That partial exemption limited the economic hit from the struck-down measures but did not remove political friction. Ottawa has been negotiating contingency measures and lining up options to protect key sectors while also seeking to diversify export markets, a strategy driven by the fact that the U.S. accounts for roughly three-quarters of Canadian exports.
Main event
The U.S. Supreme Court’s decision removed the IEEPA legal justification for certain broad tariffs, including those described as targeting fentanyl flows. Canadian Trade Minister Dominic LeBlanc welcomed the outcome on social media, repeating Ottawa’s assessment that those levies were unjustified, while stressing that work remains to handle the effect of other U.S. duties. LeBlanc said Ottawa will turn to the USMCA renewal talks and to managing residual trade measures on sectors such as steel, aluminium and autos.
Following the Court’s ruling, the White House issued a separate proclamation establishing a 10% global tariff intended to replace duties that had been based on IEEPA; the administration has stated the USMCA carve-out will continue under that new measure. Meanwhile, former President Trump posted that he planned to raise the new tariff to 15%—an announcement that has political weight but requires formal steps for implementation.
Negotiations between Ottawa and Washington have practical and political obstacles. Formal talks were interrupted last October amid a dispute over an anti-tariff advertisement funded by Ontario that aired on U.S. networks, and U.S. trade officials have publicly described negotiating with Canada as more difficult than with Mexico. U.S. Trade Representative Jamieson Greer singled out barriers such as limits on certain U.S. wine and spirits sales and Canadian media content rules as sticking points.
Analysis & implications
The immediate economic effect of the Supreme Court decision on Canada is limited because a substantial share of bilateral trade had already been exempted under USMCA provisions—around 85% by Ottawa’s and U.S. estimates. Nevertheless, the ruling reduces legal uncertainty and removes one line of argument that Washington had used to justify sweeping levies. That matters politically and could make face-to-face trade talks less acrimonious in the short term.
Even with the IEEPA measures struck down, the policy environment remains unsettled. The White House’s replacement proclamation and the public statements by former President Trump mean tariff policy is still in flux; differences between proclamation language and any future implementing actions could change market effects. For exporters in steel, aluminium and autos—sectors explicitly flagged by Canadian ministers—the continuing U.S. measures pose practical supply-chain and cost risks that must be resolved through negotiation or dispute settlement.
The USMCA review adds a compressed political timetable. All three parties must agree by 1 July whether to extend the agreement; failure to do so would unsettle an integrated trading system that supports production networks across North America. Ottawa’s strategy to diversify exports—targeting a doubling of non-U.S. sales by 2035—remains a long-term hedge but cannot eliminate near-term exposure for firms that depend on cross-border inputs and the U.S. market for demand.
Comparison & data
| Measure | Targets | Rate / Status | Notes |
|---|---|---|---|
| “Fentanyl” tariffs (IEEPA) | Canada, China, Mexico | Up to 35% (Canada previously reported at 25% then 35%) | ~85% of affected trade exempted under USMCA carve-out |
| Replacement proclamation (post-Supreme Court) | Global | 10% (Trump announced intent to raise to 15%) | White House says USMCA exemption continues under proclamation |
| Sectoral U.S. levies | Steel, aluminium, automobiles | Remain in effect | Subject of ongoing bilateral concerns and negotiations |
The table summarizes the current legal and policy patchwork: a struck-down emergency authority, a Presidential proclamation designed to fill the gap, and persistent sector-specific duties. For many Canadian exporters the most tangible risks are the standing levies on metals and autos rather than the broader emergency measures removed by the Court.
Reactions & quotes
The legal decision and next steps drew responses from officials, business groups and trade negotiators.
“The levies were unjustified,”
Dominic LeBlanc, Canada’s Minister of International Trade
Minister LeBlanc framed the ruling as validation of Canada’s position while emphasizing that Ottawa must now manage residual impacts on affected industries and prepare for USMCA review talks.
“It has been more challenging negotiating with Canada,”
Jamieson Greer, U.S. Trade Representative
Greer has publicly pointed to market-access and regulatory issues — including retail availability for U.S. wines and content requirements for streaming services — as impediments to faster progress in talks, signaling the areas that will likely be raised in formal review meetings.
“Predictable, rules-based trade is essential for manufacturers on both sides of the border,”
Dennis Darby, CEO, Canadian Manufacturers & Exporters
Industry groups highlighted that legal rulings help but that businesses need a durable, enforceable agreement to avoid repeated disruptions to cross-border supply chains and investment decisions.
Unconfirmed
- Whether the Trump announcement to raise the replacement tariff from 10% to 15% will be implemented immediately or requires further administrative steps remains unconfirmed.
- Reports that Washington prefers separate bilateral agreements in lieu of a trilateral USMCA renewal are based on statements by some officials but the formal negotiating position for the review remains to be clarified by U.S. negotiators.
- The exact timeline and agenda for the LeBlanc–Greer talks in the coming weeks have been announced but the substantive outcomes of those meetings are not yet confirmed.
Bottom line
The Supreme Court decision narrows one legal channel for sweeping U.S. emergency tariffs and offers Canada a political opening as formal USMCA review talks approach. Yet the practical trade disputes that most worry Canadian industry—tariffs on steel, aluminium and autos, and unresolved market-access issues—remain in play. For Ottawa the immediate task is to convert a courtroom win into concrete, negotiated fixes before the USMCA deadline on 1 July.
Businesses and investors should watch three things closely: whether the 10% replacement tariff is implemented or changed, the scope of sectoral levies that remain active, and the outcome of the USMCA renewal discussions. If negotiators can secure a smooth renewal and address targeted barriers, that would restore predictability; if not, Canada faces continued exposure despite the Court ruling.
Sources
- BBC News — news media report summarizing the Supreme Court ruling and subsequent trade reactions.