In this Canada – Trump Administration 2.0 Update, Alex Steinhouse of the Fasken Government Relations and Political Law team provides insights on this week’s Canada-US relations.
US Court of International Trade Ruling
In a shot quickly heard around the world Wednesday night, the federal US Court of International Trade unanimously struck down[0] President Trump’s “Liberation-Day” tariffs on dozens of countries - currently temporarily set at 10% - while also striking down the President’s paused ‘reciprocal tariffs’ of between 20% and 50% on 60-plus trading partners that were set to resume on July 9th if no new trade arrangements were agreed upon, as well as the specific tariffs on Canada, Mexico, and China relating ostensibly to fentanyl and the border.
The court concluded that the President’s efforts to respond through these tariffs to his broad claims of national emergencies exceeded his legal authority under the International Emergency Economic Powers Act of 1977 (IEEPA). While the statute gives Presidential authority to control economic transactions after declaring a national emergency, it had never before been used to impose tariffs.
As such, according to the Court, the IEEPA does not authorize the President to impose “unbounded” tariffs to respond to trade deficits : “The Worldwide and Retaliatory Tariff Orders exceed any authority granted to the President by IEEPA to regulate importation by means of tariffs.”
The decision separately blocked the fentanyl tariffs because it said "they do not deal with the threats" Trump cited to justify the duties in his executive order. On the latter, the Trump administration had conceded during the arguments stage that the tariffs were an attempt to gain leverage over the countries in question in order to force them to change their behaviour. The court said there needed to be more of a “direct link.”
The case before the court was brought by several small businesses, but the ruling also covers a separate challenge filed by 12 Democrat-led states. The ruling was delivered by a three-judge panel that included Obama appointee Gary Katzmann, Reagan appointee Jane Restani and Trump appointee Timothy Reif. The opinion was signed by the panel.
Immediately following the rule, the White House deputy chief of staff, Stephen Miller, posted on social media that Americans are "living under a judicial tyranny." White House spokesman, Kush Desai, went on to say "it is not for unelected judges to decide how to properly address a national emergency." The Trump administration has already filed a notice of appeal.[1]
Then Thursday afternoon, at the time of publication of this update, the Appeals Court for the Federal Circuit granted the Trump administration a temporary stay on the lower court decision.[2]
The path forward remains unclear, and somehow brings even more uncertainty for international trade. On top of the appeal, the President may attempt to impose tariffs under other laws, including under the Trade Act, which could give the administration about five months of continuity as it waits for an appeal that could overturn this decision on the merit.[3]
The decision does not impact the section 232 tariffs under the Trade Expansion Act of 1962 (national security grounds) on steel and aluminum, as well as automobiles.
Speaking in response to the Court decision in the House of Commons on Thursday before the stay was granted, Prime Minister Mark Carney said the ruling "is consistent with Canada's long-standing position that the US IEEPA tariffs were unlawful as well as unjustified. That said, we recognize that our trading relationship with the United States is still profoundly and adversely threatened and affected by similarly unjustified 232 tariffs against steel, aluminum and the auto sector, as well as continuing threats of tariffs against other strategic sectors including lumber, semiconductors, and pharmaceuticals."
Meanwhile, Conservative Leader Pierre Poilievre, in a post on social media on Thursday, called the court's decision "good news" but said Canada "can no longer put all our eggs in the US basket. Too risky. Canada must fire up free enterprise to build pipelines, powerlines, ports, rail, roads, and tech - so we are strong, self-reliant and sovereign for a change.”
Big, Beautiful Bill’s Potential Canadian Impacts
Meanwhile, President Trump’s “big, beautiful bill” (a wide-ranging tax bill numbering over a thousand pages, which narrowly passed the US House of Representatives last week, and is currently before the Senate) may impact US tax treatment of Canadian companies, pension funds, and individuals earning money from US sources.
Unless amended by the Senate, the bill proposes to retaliate against “unfair” foreign tax regimes, by threatening to override tax treaties, and impose new or higher taxes as soon as January 2026. According to the Financial Post, Canada could be included as a target, owing, amongst other initiatives, to our Digital Services Tax, which we have discussed in previous updates.[4] Should the bill be amended, it will then need to return to House of Representatives for another high-stakes vote.
First Days of Parliament’s Return
For the first time in nearly fifty years, Canada’s Sovereign delivered the Speech from the Throne on Tuesday, before an impressive contingent of Canadians assembled on the floor of the Senate chamber. In remarks mostly prepared on his behalf by Prime Minister Carney’s government, King Charles III said Canada intends to bring in the largest transformation of the Canadian economy since the Second World War. In these times of great global uncertainty, Canada’s “relationships with partners are also changing.”
The King also asserted Canadian sovereignty, by citing the Canadian national anthem, saying that it reminds us that “the true north is, indeed, strong and free”. The remark received loud, sustained applause in the Senate chamber.
The House of Commons is currently debating the Speech from the Throne. Before the House is supposed to rise on June 20th, on top of opposition and supply days, the government intends to pass its promised ‘middle class tax cut’ and to lower interprovincial trade barriers by Canada Day, as well as introduce measures to fast-track major infrastructure projects (discussed further below), and other measures previously discussed in these updates intended to enhance security at the Canada-US border.
Meanwhile, the government presented to Parliament its spending plans for the fiscal year on Tuesday ($486 billion in all), but will only present a federal budget in the fall.[5] Prime Minister Carney has promised that his government will be “very, very busy” in the next few weeks, the next few months, and the next few years.[6]
First Ministers’ Meeting Next Week
Prime Minister Carney will meet the Premiers on June 2nd. At the top of the agenda: the federal government’s plan to fast track major nation-building projects, which it has been calling the “One Canadian Economy” legislation, and which is intended to foster economic growth and diversification. The government intends to table the bill soon after the meeting, and has publicly committed to trying to get it passed by Canada Day.
According to a document obtained by the Globe and Mail, the Prime Minister will present “provincial and territorial premiers next week with the broad outlines of legislation that will impose a two-year approval process for major nation-building projects such as ports, critical mineral mines and trade corridors. The legislation contains measures to fast-track significant infrastructure projects through upfront regulatory approvals, and includes a framework to remove all federal barriers to interprovincial trade.”[8]
The Prime Minister has previously said that he will be asking the Premiers and businesses to identify major infrastructure projects that can quickly get started.
G7 Meeting Update
President Trump has agreed to attend the G7 Leaders’ Summit on June 15-17 in Kananaskis, Alberta. The Prime Minister has signaled that he will use the opportunity to discuss tariffs with the President.
To that end, it has been confirmed that Canada has indeed invited Mexican President to join the meeting, presumably in an attempt to foster a North American trade conversation/resolution to the trade war. President Sheinbaum, however, said on Wednesday, that she has yet to decide whether she will attend the summit.[9] Canada has also extended an invitation to Ukrainian President Volodymyr Zelenskyy,[10] who has already confirmed that he will be attending.
In other Mexican political news, earlier this week, Mexico’s Minister of Economy, Marcelo Ebrard, said he expected the joint CUSMA-review to begin in September or October of this year. However, Prime Minister Carney has rather suggested that his government is looking to make more progress on bilateral issues with the Americans before any review takes place on CUSMA.
