CBC
Countries around the world are bracing for an economic bruising on Monday. And few have more at stake than Canada.That's because three-quarters of everything Canada sells into the world, it sells to the United States, and U.S. president-elect Donald Trump is threatening trade penalties the day he takes office.We do know he's planning 100 executive orders starting on inauguration day, and it's virtually certain they will include trade and border measures.What we don't know is the scope, the severity and the structure of his promised trade actions. Even Trump's Republican allies on Capitol Hill aren't certain, and public comments suggest the full plan won't be complete Monday.WATCH | Trump's 25% tariff threat against Canada, Mexico: "In a nutshell. 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'd like to say we know what's going to happen. I suspect we won't know until Monday," she said.Here are five things to watch.What law will he use?The president has different powers to implement tariffs under U.S. trade laws. No president in modern history has used these laws as aggressively as Trump is threatening.Trump will apply different tools at different times, on different countries and products, Canada-U.S. trade expert Laura Dawson predicts."I think he's going to try all avenues," Dawson said.Those potential tools include Section 232 of the 1962 Trade Expansion Act, which allows tariffs on national-security grounds, as Trump once did with steel and aluminum.Then there's Section 301 of the 1974 Trade Act — it lets a president penalize unfair practices, as Trump and President Joe Biden have both done with China.Another piece of the 1974 law, Section 122, allows tariffs to alleviate a trade imbalance. It's worth noting here that Trump constantly complains about imbalanced trade.Finally, there's a never-before-used tariff weapon: the 1977 International Emergency Economic Powers Act (IEEPA), in the event of a national emergency.While no president has ever applied that 1977 law to impose tariffs, it holds an attractive quality for a diehard protectionist: it works fast.Implementing the IEEPA first requires a president to declare a national emergency; Trump clearly hinted at one when he complained of a broken border with Mexico and Canada. "If they want to push the boundaries of what's legal, they could try that," said Simon Lester, a trade lawyer, analyst and onetime World Trade Organization official. "They could just say, 'Hey, IEEPA gives us this authority. We're imposing 10 per cent tariffs on the whole world, or on these specific products. Let's see what the courts have to say about it,'" Lester said.All the other laws carry certain encumbrances: Sections 232 and 301, for example, require some sort of study, and the use of Section 122 is limited to 150 days. Trump could turn to these laws for some of his actions.WATCH | 'There is no border in automotive,' says industry leader:How big will he go?There's a reason estimates of the economic damage vary so widely: Trump has been almost comically inconsistent in discussing the size of his tariffs.He's now threatening a 25 per cent levy on Canada and Mexico, which would be devastating and, if applied across the economy, would trigger a sharp recession.But he's been all over the map since the start of his latest presidential campaign, and even in recent weeks has veered between different arguments for tariffs."We've heard 10 per cent universal [tariffs], 20 per cent universal, 60 per cent on China, 40 per cent on China, 100 per cent on automobiles, 200 per cent, 1,000 per cent," said U.S. federal budget expert Marc Goldwein."I think we all made fun of this, but I get it," Goldwein said. He says Trump has made clear in his public remarks that he's not set on any specific number. He's set on using tariffs to achieve certain things.But any significant tariff on Canada will do long-term damage, according to Dawson, who says this is the case even if the tariffs are only briefly in place."It moves investment south. It stops production decisions," she said. She's already hearing international companies mull shifting some production from Canadian facilities to their U.S. ones. Honda has mused publicly about production cutbacks in Canada.There are signs Trump will only reveal partial details of his tariff plan Monday. And there are arguments for moving slowly, include a delicate budgeting process in Congress. (Anna Rose Layden/Reuters)How fast will he go?There are reasons to believe we won't get the full picture on Monday. There have been various media leaks about ongoing debates in Trump's circle, and his nominee for treasury secretary in a congressional hearing hinted that the full policy is still being worked out.Plus, there are benefits to moving slowly. One is to test market reaction, and not risk a meltdown on Day 1 of his presidency. With that in mind, some aides are reportedly urging Trump to start with a tiny tariff, and gradually raise it by two percentage points each month. Scott Lincicome, a trade lawyer and analyst, expects a gradual ramping up. He says he envisions limited actions on Day 1: perhaps tariffs on China, plus some announcement to launch the process for additional tariffs. For example, he said, Trump could declare a national emergency under IEEPA, or start months-long investigations under sections 232 or 301. Then he'd use it all as a negotiating hammer."These things give Trump the ability to run around the world threatening everybody without actually hurting the economy. I mean, it'll hurt the economy — invisibly. Trade policy uncertainty does hurt investment," Lincicome said. "[It puts] Trump in the middle 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 slow: the budgeting process. Later this year, congressional Republicans plan a marquee tax-cut bill. It's complicated and it involves the process 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 is not allowed to add to the deficit; tariff revenue would help, according to a paper drafted by Republican lawmakers. It's a longshot. Congressional Republicans currently insist this isn't their plan. And enough of them still dislike tariffs that an attempt to entrench them in long-term law could wind up killing the bill in a close vote."The tariffs will not be legislated," Lincicome said.But it's too early to be sure, in Goldwein's view. He says Republicans are desperate to pass the tax cuts and, in his view, "They're going to try everything."Trump's tariffs have three objectives, Scott Bessent, the nominee for treasury secretary, told his Senate confirmation hearing on Thursday. (Kevin Lamarque/Reuters)What's Trump's goal here?There are three objectives to Trump's tariffs, his nominee for treasury secretary told a Senate confirmation hearing this past week.One is to remedy unfair trade practices, either by industry or by country, said Scott Bessent, who alluded specifically to China and steel.A second: to raise revenue. "For the federal budget," said Bessent, a billionaire financier. And finally, there's the art of the deal. "For negotiations," he said, explaining that the tariffs can be used as leverage over other countries instead of sanctions, which he said Trump believes are over-used.Just look at how Canada responded. That tariff threat prompted Canada to announce a laundry list of policies related to border security, migration, fentanyl trafficking and organized crime.Bessent did not specifically mention Canada. But he did refer to Mexico and fentanyl while talking about tariffs as negotiating leverage.Don't look to the courts to stop Trump, trade-watchers say. Look to the stock market, where negative reaction is likelier to deter him than a lawsuit. (Andrew Kelly/Reuters)What might stop Trump?Don't count on the courts. Trade experts interviewed for this story, and in other writing, overwhelmingly call it unlikely that lawsuits would succeed against Trump.Judges have largely deferred to presidents on matters of national security and tariffs, they said. So has Congress, having added these presidential powers into law during the Cold War.If there are any guardrails on Trump — any checks at all — look elsewhere. In Lincicome's view, the biggest one is the market. Trump will be loath to launch his presidency with a stock-market crash under a battery of negative economic headlines, Lincicome said.And the market isn't expecting big tariffs, based on its current behaviour. At most, Lincicome said, it's expecting tariffs on China, and on a few critical goods. "Not this giant global tariff. Not 25 per cent tariffs on avocados from Mexico," Lincicome said. "[Trump] wants to avoid a million news stories about Trumpflation. About guacamole prices going up before the Super Bowl," he said. "I think that'll serve as a check."To be clear: if Trump barrels ahead, lawsuits will fly. But even if those lawsuits succeed, it could take months or years of litigation to dislodge them, according to Lincicome."By the time it gets through the courts, the damage has already been done," he said.
