Countries around the world are bracing for an economic setback on Monday. And few have more at stake than Canada.
That’s because three-quarters of everything Canada sells to the world is sold to the United States and U.S. President-elect Donald Trump is threatening trade penalties the day he takes office.
We know he’s planning 100 Executive Orders The measures begin on Inauguration Day and are all but certain to include trade and border measures.
What we don’t know is the scope, severity and structure of his promised trade measures. Even Trump’s Republican allies on Capitol Hill aren’t sure, and public comments suggest the full plan won’t be complete on Monday.
In a post on his Truth Social platform, US President-elect Donald Trump threatened to impose a 25 percent tariff on all goods from Canada and Mexico until both countries stop what he calls the “invasion” of illegal migrants and Drugs through the USA called border.
“In short, what I’m hearing is, ‘We don’t know what he’s going to do,'” Canada’s U.S. Ambassador Kirsten Hillman told CBC News, describing her conversations with Republican lawmakers and state governors.
“I want to say that we know what is going to happen. I suspect we won’t know until Monday,” she said.
Here are five things to keep in mind.
What law will he apply?
The president has varying powers to enforce tariffs under U.S. trade laws. No president in modern history has used these laws as aggressively as Trump is threatening to do.
Trump will use different tools at different times, for different countries and products, predicts Canadian-American trade expert Laura Dawson.
“I think he’s going to try all the options,” Dawson said.
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These potential tools contain Section 232 of the Trade Expansion Act of 1962, which allows tariffs on national security grounds, as Trump once did on steel and aluminum.
Then there’s Section 301 of the Trade Act of 1974 – it allows a president to punish unfair practices, as Trump and President Joe Biden have done both done with China.
Another part of the 1974 Act, Section 122, allows for the imposition of tariffs to alleviate a trade imbalance. It is worth noting here that Trump constantly complains about unbalanced trade.
Finally, there is a customs weapon that has never been used before: the 1977 International Emergency Economic Powers Act (IEEPA) in the event of a national emergency.
Although no president has ever used this 1977 law to impose tariffs, it has one attractive feature to a die-hard protectionist: It works quickly.
To implement the IEEPA, a president must first declare a national emergency. Trump clearly implied this when he complained about a broken border with Mexico and Canada.
“If they want to push the boundaries of what is legal, they could try,” said Simon Lester, a trade lawyer, analyst and former World Trade Organization official.
“You could just say, ‘Hey, IEEPA gives us this authority. We impose 10 percent tariffs worldwide or on these specific products. Let’s see what the courts say,’” Lester said.
All other laws impose certain burdens: Sections 232 and 301, for example, require some sort of study, and the use of Section 122 is limited to 150 days. Trump could rely on these laws for some of his actions.
Flavio Volpe, president of the Automotive Parts Manufacturers’ Association, says supply chains in the North American automotive industry are so integrated that “there are no boundaries in the automotive industry.” He says U.S. President-elect Donald Trump is “trying to disrupt the conversation early.”
How big will he be?
There’s a reason economic damage estimates vary so much: Trump has been comically inconsistent in discussing the level of his tariffs.
He is now threatening a 25 percent levy on Canada and Mexico that would be devastating and, if applied to the entire economy, trigger a severe recession.
But he has been ever-present since the start of his last presidential campaign, and even in recent weeks has oscillated between different arguments for tariffs.
“We heard: 10 percent universal (tariffs), 20 percent universal, 60 percent for China, 40 percent for China, 100 percent for cars, 200 percent, 1,000 percent,” the US federal budget said expert Marc Goldwein.
“I think we all made fun of it, but I understand,” Goldwein said.
He says Trump has made it clear in his public statements that he is not committed to a specific number. He strives to achieve certain goals with tariffs.
But any significant tariff against Canada will cause long-term damage, says Dawson, who says this will be the case even if the tariffs are only in place for a short period of time.
“It shifts investment south. It stops production decisions,” she said.
She’s already hearing that international companies are considering moving some of their production from Canadian facilities to their U.S. facilities. Honda has pondered publicly about production cuts in Canada.
How fast will he go?
There are reasons to believe we won’t get the full picture on Monday. They existed different media Leaks ongoing debates in Trump’s circle and his nomination for treasury secretary in a congressional hearing suggested that full policy is still being worked out.
There are also benefits to moving slowly.
One is to test the market reaction and not risk a collapse on the first day of his presidency. In this sense there are some helpers allegedly He is urging Trump to start with a tiny tariff and gradually increase it by two percentage points each month.
Scott Lincicome, a trade lawyer and analyst, expects a gradual increase. He says he envisions limited action on day one: perhaps tariffs against China, as well as an announcement to begin the process for additional tariffs.
For example, Trump could declare a national emergency under IEEPA or launch a months-long investigation under Section 232 or 301. Then he would use everything as a negotiating hammer.
“These things give Trump the ability to go around the world threatening everyone without actually hurting the economy. I mean, it will hurt the economy – invisibly. “Uncertainty in trade policy is hurting investment,” Lincicome said.
“(It puts) Trump at the center of the Trump show without actually imposing tariffs on Ford Festivas from Mexico and auto parts going to BMW in South Carolina.”
Another argument for going slowly: the budgeting process. Republicans in Congress are planning a major tax cut bill later this year.
It is complicated and involves the Proceedings for bypassing the Senate’s three-fifths filibuster rule and passing a budget bill with a simple majority.
To make the tax cuts permanent, the bill must not increase the deficit; Tariff revenue would help, says a paper written by Republican lawmakers.
It is a vision. Republicans in Congress currently insist that this is not their plan. And enough of them still oppose tariffs that trying to enshrine them in long-term law could result in the bill failing in a close vote.
“The tariffs are not regulated by law,” Lincicome said.
But Goldwein believes it is still too early to be sure. He says Republicans are desperate to pass the tax cuts and, in his view, “they’ll try anything.”
What is Trump’s goal here?
Trump’s tariffs have three goals, his nominee for treasury secretary said at a Senate confirmation hearing last week.
One is to eliminate unfair trade practices either by the industry or the country, said Scott Bessent, alluding specifically to China and steel.
Second: To increase revenue. “For the federal budget,” said Bessent, a billionaire financier.
And finally there is the art of the deal. “For negotiations,” he said, explaining that the tariffs could be used as leverage against other countries rather than imposing sanctions, which Trump believes are being overused.
Just look at how Canada responded. This tariff threat led Canada to announce a series of measures in the areas of border security, migration, fentanyl trafficking and organized crime.
Bessent did not specifically mention Canada. However, he was referring to Mexico and fentanyl when he spoke of tariffs as a bargaining pressure.
What could stop Trump?
Don’t rely on the courts. Trading experts were interviewed for this and other stories Writesay it overwhelmingly unlikely that lawsuits against Trump would be successful.
They said the justices largely deferred to the president on issues of national security and tariffs. This also applies to Congress, which enshrined these presidential powers into law during the Cold War.
If there are any guardrails for Trump — any checks at all — look elsewhere. According to Lincicome, the market is the biggest factor.
Trump will refuse to begin his presidency with a stock market crash and a series of negative economic headlines, Lincicome said.
And the market does not expect high tariffs based on its current behavior. Lincicome said it expects at most tariffs on China and on some critical goods.
“Not this huge global tariff. No 25 percent tariffs on avocados from Mexico,” Lincicome said. “(Trump) wants to avoid a million news stories about Trumpflation. About rising guacamole prices before the Super Bowl,” he said.
“I think this will serve as a check.”
To be clear: If Trump moves forward, there will be lawsuits. But even if those lawsuits succeed, it could take months or years for them to be dismissed, according to Lincicome.
“By the time it gets to court, the damage has already been done,” he said.
