Prepare for impact: 5 things to watch for with Trump’s upcoming tariffs

Countries around the world are bracing for an economic shock on Monday. And few are more at stake than Canada.

This is because three-quarters of everything Canada sells to the world, it sells to the United States, and US President-elect Donald Trump is threatening to impose trade sanctions. The day he took office.

We know he’s planning 100 executive orders Starting on Inauguration Day, they will almost certainly include trade and border measures.

What we don’t know is the scope, intensity and structure of his promised trade actions. Even Trump’s Republican allies on Capitol Hill aren’t sure, and public comments indicate the full plan won’t be completed on Monday.

“In short. 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 would say we know what’s going to happen. I guess we won’t know until Monday,” she said.

Here are five things to watch for.

What law will he use?

The President has various powers to implement tariffs under US trade laws. No president in modern history has used these laws as aggressively as Trump is threatening to do.

Trump will apply different tools at different times, to different countries and products, predicts Canadian-American trade expert Laura Dawson.

“I think he’ll try every avenue,” Dawson said.

• This Sunday, Cross Country Checkup asks: What would another Trump presidency mean to you? How seriously do you take his tariff threats? Fill This model You can appear on the show or read your commentary on air.

Those potential tools Includes Section 232 of the Trade Expansion Act of 1962, which allows tariffs to be imposed on national security grounds, as Trump once did with steel and aluminum.

Then there’s Section 301 of the Trade Act of 1974 — which allows the president to sanction unfair practices, as Trump and President Joe Biden have done. Both were done With China.

Another part of the 1974 law, Section 122, allows tariffs to mitigate trade imbalances. It is worth noting here that Trump constantly complains about unbalanced trade.

Finally, there is a tariff 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 enforced the 1977 tariff law, it has an attractive quality for the hard-line protectionist: it acts quickly.

Implementing IEEPA first requires the president to declare a national emergency; Trump clearly hinted at this when he complained about breaking the border with Mexico and Canada.

“If they want to push the boundaries of what is legal, they can try that,” said Simon Lister, a trade lawyer and analyst who was an official at the World Trade Organization.

“They can just say: Hey, IEEPA gives us this authority. We’re imposing 10 percent tariffs on the whole world, or on these specific products. Let’s see what the courts have to say about that,” Lester said.

All other laws carry certain burdens: Sections 232 and 301, for example, require some sort of study, and the use of Section 122 is limited to 150 days. It is possible that Trump will resort to these laws in some of his actions.

How far will he go?

There’s a reason why estimates of the economic damage vary so widely: Trump has been almost comically inconsistent in discussing the size of his tariffs.

He now threatens to impose a 25 percent tax on Canada and Mexico, which would be devastating and, if applied across the economy, lead to a severe recession.

But he has been all over the place since the start of his last presidential campaign, and even in recent weeks has veered between different arguments on tariffs.

“We have heard (tariffs) of 10 percent global, 20 percent global, 60 percent on China, 40 percent on China, 100 percent on cars, 200 percent, and 1,000 percent,” the US federal budget said. expert Mark Goldwyn.

“I think we all laughed at this, but I get it,” Goldwyn said.

He says Trump made it clear in his public statements that he did not specify any specific number. He set out to use definitions to achieve certain things.

But any large tariffs on Canada would cause long-term damage, according to Dawson, who says that’s the case even if the tariffs are only imposed briefly.

“It moves investment south,” she said. “It stops production decisions.”

You’ve already heard that international companies are considering shifting some production from their Canadian facilities to their US facilities. Honda has Openly pensive About production cuts in Canada.

How fast will it go?

There are reasons to believe that we will not get the full picture on Monday. He was there diverse Media Leaks On ongoing discussions in Trump’s circle, his nominee for Treasury Secretary hinted at a congressional hearing that the full policy was still being worked out.

Additionally, there are benefits to moving slowly.

The first is to test the market reaction, and not risk a collapse on the first day of his presidency. With that in mind, some helpers do just that It is said He urged Trump to start with small tariffs, and gradually raise them by 2 percentage points each month.

Scott Lincecome, a lawyer and trade analyst, expects a gradual intensification. He says he envisions limited action on day one: perhaps tariffs on China, as well as some announcement of the launch of additional tariffs.

For example, he said, Trump could declare a national emergency under IEEPA, or launch months-long investigations under Section 232 or 301. Then use it all as a negotiating hammer.

“These things give Trump the ability to go around the world and threaten everyone without actually hurting the economy,” Lincecum said. “I mean, they will hurt the economy — invisibly. Uncertainty in trade policy hurts investment.”

“(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 slowness: the budgeting process. Later this year, Republicans in Congress plan to pass a major tax cut bill.

It is complex and involved practical To bypass the three-fifths rule in the Senate and pass the budget bill by a simple majority.

To make the tax cuts permanent, the bill may not increase the deficit; Tariff revenue That would helpAccording to a paper drafted by Republican lawmakers.

It’s a long shot. Republicans in Congress currently insist that this is not their plan. Enough of them still hate tariffs that trying to enshrine them into long-term law might end up killing the bill in a close vote.

“Tariffs will not be legislated,” Lincicome said.

But it’s too early to know for sure, in Goldwyn’s view. He says Republicans are desperate to pass tax cuts, and in his view, “they will try everything.”

What is Trump’s goal here?

There are three goals for Trump’s tariffs, his nominee for Treasury secretary said during a Senate hearing last week.

The first is to address unfair trade practices, both by industry and by the state, said Scott Besant, who specifically pointed to China and steel.

Second: increasing revenues. “For the federal budget,” said Besant, the billionaire financier.

Finally, there is the art of the deal. “For the sake of negotiations,” he said, explaining that tariffs could be used as pressure on other countries instead of sanctions, which he said Trump believes are exaggerated.

Just look at how Canada responded. This tariff threat prompted Canada to announce a long list of policies related to border security, immigration, fentanyl trafficking and organized crime.

Besant did not mention Canada specifically. But he pointed to Mexico and fentanyl while talking about tariffs as a means of negotiation.

What might stop Trump?

Don’t count on the courts. Trade experts were interviewed for this story, and others writingwe call it overwhelmingly improbable That lawsuits will succeed against Trump.

They said judges largely defer to presidents on matters of national security and tariffs. So did Congress, having added these presidential powers to the law during the Cold War.

If there are any guardrails for Trump — any at all — look elsewhere. From Lincicome’s perspective, the biggest one is the market.

Lincecum said Trump would not want to start his presidency with a stock market crash given a host of negative economic headlines.

The market is not expecting large tariffs, based on its current behavior. Lincicome said it at most expects to impose tariffs on China and on a few important goods.

“This is not a giant global tariff. Not a 25 percent tariff on avocados from Mexico,” Lincecome said. “(Trump) wants to avoid a million news stories about Trump inflation. And about guacamole prices going up before the Super Bowl,” he said.

“I think this would be a check.”

To be clear: If Trump goes ahead, lawsuits will fly. But even if those lawsuits succeed, it could take months or years of litigation to unseat them, according to Lincicome.

“By the time the case reaches the courts, the damage has already been done,” he added.