Countries around the world are bracing for an economic hit 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 US President-elect Donald Trump is threatening trade sanctions. the day he takes office.
We know you’re planning 100 executive orders starting on Inauguration Day, and will almost certainly include trade and border measures.
What we do not know is the scope, severity and structure of his promised commercial actions. Even Trump’s Republican allies on Capitol Hill aren’t sure, and public comments suggest the full plan won’t be complete by 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 called the “invasion” of undocumented immigrants and drugs crossing the United States. edge.
“Simply put, what I’m hearing is, ‘We don’t know what he’s going to do,'” Canada’s ambassador to the United States, 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,” he said.
Here are five things to watch.
What law will you use?
The president has different powers to implement tariffs under US trade laws. No president in modern history has used these laws as aggressively as Trump threatens.
Trump will apply different tools at different times, on different countries and products, predicts Canada-U.S. trade expert Laura Dawson.
“I think he’ll try every avenue,” Dawson said.
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Those potential tools include 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 criminalize unfair practices, as Trump and President Joe Biden have done. both facts with China.
Another part of the 1974 law, Section 122, allows tariffs to alleviate a trade imbalance. It’s worth noting here that Trump constantly complains about the trade imbalance.
Finally, there is a tariff weapon never used before: the 1977 International Emergency Economic Powers Act (IEEPA), in the event of a national emergency.
While no president has ever used that 1977 law to impose tariffs, it has an attractive quality for a staunch protectionist: It works quickly.
Implementation of the IEEPA first requires a president to declare a national emergency; Trump clearly hinted at one when he complained about a broken border with Mexico and Canada.
“If they want to push the boundaries of what’s legal, they could try it,” said Simon Lester, a trade lawyer, analyst and former World Trade Organization official.
“They could just say, ‘Hey, the IEEPA gives us this authority. We’re imposing 10 percent tariffs on everyone, or on these specific products. Let’s see what the courts have to say about it,'” Lester said.
All other laws carry certain burdens: Articles 232 and 301, for example, require some type of study, and the use of Article 122 is limited to 150 days. Trump could resort to these laws for some of his actions.
Flavio Volpe, president of the Automotive Parts Manufacturers Association, says the North American auto industry’s supply chains are so integrated that “there are no borders in the automotive sector.” He says US President-elect Donald Trump “is trying to disrupt the conversation from the beginning.”
How big will it get?
There’s a reason estimates of economic damage vary so much: Trump has been almost comically inconsistent in discussing the size of his tariffs.
He is now threatening to impose a 25 percent tax on Canada and Mexico, which would be devastating and, if applied economy-wide, would trigger a sharp recession.
But he has been all over the map since the start of his last presidential campaign, and even in recent weeks he has oscillated between different arguments in favor of tariffs.
“We have heard 10 percent universal (tariffs), 20 percent universal, 60 percent for China, 40 percent for China, 100 percent for automobiles, 200 percent, 1,000 percent,” the US federal budget said. Joined. expert Marc Goldwein.
“I think we all make fun of this, but I understand it,” Goldwein said.
He says Trump has made clear in his public statements that no specific figure has been set. He is determined to use tariffs to achieve certain things.
But any significant tariffs on Canada will cause long-term damage, according to Dawson, who says this is the case even if the tariffs are only applied briefly.
“This moves investment south. It stops production decisions,” he said.
You’re already hearing that international companies are considering moving some production from Canadian facilities to American ones. Honda has publicly reflected about production cuts in Canada.
How fast will it go?
There is reason to believe that we will not have the full picture on Monday. there has been several 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, moving slowly has its benefits.
One is to test the market reaction and not risk a collapse on the first day of his presidency. With this in mind, some attendees are reportedly urging Trump to start with a small tariff and gradually increase it by two percentage points each month.
Scott Lincicome, a lawyer and business analyst, expects a gradual increase. He says he expects limited action on the first day: perhaps tariffs on China, plus some announcement to begin the process of additional tariffs.
For example, he said, Trump could declare a national emergency under the IEEPA, or launch months-long investigations under Sections 232 or 301. He would then use all of that as a negotiating hammer.
“These things give Trump the ability to go around the world threatening everyone without actually hurting the economy. I mean, they will hurt the economy, invisibly. Trade policy uncertainty hurts investment,” Lincicome said.
“(It puts) Trump in the middle of the Trump Show, without imposing tariffs on Ford Festivas from Mexico and auto parts that go to BMW in South Carolina.”
Another argument for going slow: the budget process. Later this year, congressional Republicans plan a major tax cut bill.
It is complicated and involves 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 increase the deficit; tariff revenue would helpaccording to a document drafted by Republican legislators.
It’s a long shot. Congressional Republicans currently insist that this is not their plan. And many of them still don’t like the tariffs, so an attempt to consolidate them into long-term law could end up derailing the bill in a close vote.
“Tariffs will not be legislated,” Lincicome said.
But in Goldwein’s view, it’s too early to be sure. He says Republicans are desperate to pass tax cuts and, in his opinion, “they’re going to try everything.”
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 remedy unfair trade practices, whether by industry or by country, said Scott Bessent, who specifically alluded to China and steel.
A second: increase income. “For the federal budget,” said Bessent, a billionaire financier.
And finally, there is the art of the deal. “For negotiations,” he said, explaining that tariffs can be used as leverage on other countries rather than sanctions, which he said Trump believes are overused.
Just look at how Canada responded. That tariff threat led Canada to announce a long 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 a negotiating lever.
What could stop Trump?
Don’t count on the courts. Trading experts interviewed for this article and others writingcall it overwhelming unlikely that lawsuits against Trump would be successful.
Judges have largely deferred to presidents on national security and tariff issues, they said. So has Congress, having written these presidential powers into law during the Cold War.
If there are guardrails against Trump (some kind of check), look elsewhere. For Lincicome, the biggest is the market.
Trump will be reluctant to start his presidency with a stock market crash under a barrage of negative economic headlines, Lincicome said.
And the market does not expect large tariffs, considering its current behavior. At most, Lincicome said, he expects tariffs on China and some critical goods.
“Not this giant global tariff. Not 25 percent tariffs on avocados from Mexico,” Lincicome said. “(Trump) wants to avoid a million stories about Trumpflation. About the increase in guacamole prices before the Super Bowl,” he said.
“I think that will serve as a control.”
To be clear: If Trump goes ahead, the lawsuits will fly. But even if those lawsuits are successful, it could take months or years of litigation to dislodge them, according to Lincicome.
“By the time it goes to court, the damage has already been done,” he said.
