The U.S. Supreme Court heard arguments last Wednesday regarding former President Donald Trump’s tariffs on Canada and other allies, raising significant questions about the extent of presidential power in imposing taxes. The case centers on the International Emergency Economic Powers Act (IEEPA), a law enacted in 1977 primarily for imposing sanctions on adversaries like Iran and North Korea. The justices expressed skepticism about whether Congress intended to grant such broad taxing authority to the president.

Trump’s legal team argued that the IEEPA allows the president to impose tariffs under the guise of “regulating importation.” This interpretation suggests that the term “regulate” could effectively mean “tax.” If accepted, this would enable the executive branch to generate revenue without congressional approval, relying solely on a presidential proclamation. This interpretation raises concerns reminiscent of the Founding Fathers' opposition to taxation without representation, as they specifically assigned the power to tax to Congress.

During the hearing, Chief Justice John Roberts directly questioned the Solicitor General about the implications of this argument. He asked whether the president could impose an income tax using the same rationale. The response was not definitive. Justice Sonia Sotomayor emphasized that taxation is a power reserved for Congress, while Justice Elena Kagan pointed out that when Congress revised the IEEPA in 1977, it removed any language related to revenue generation. Justice Jackson cautioned that the government’s interpretation could undermine the original intent of the IEEPA, which was designed to limit emergency powers rather than expand them.

Even Justice Neil Gorsuch, who typically supports executive authority, described the government’s claim as a “remarkable claim of boundless power,” suggesting it would allow the president to act with little constraint in foreign affairs.

Following the hearing, constitutional and trade scholars discussed the implications of the arguments presented. They echoed the justices' concerns, questioning where Congress had ever explicitly authorized such expansive powers. The troubling reality is that Congress has gradually ceded fiscal authority to the executive branch over the years, permitting presidents to act in ongoing “emergencies.” This shift has resulted in an executive branch wielding economic powers that were once reserved for wartime.

For Canada, the stakes are high. The 25 percent tariffs imposed under the IEEPA have severely impacted its economy. Companies like Algoma Steel reported a 23 percent drop in quarterly revenue, while Stelco temporarily shut down two blast furnaces, and Rio Tinto’s Kitimat smelter reduced production by 30 percent. These figures translate into real job losses and reduced incomes for workers.

Bank of Canada Governor Tiff Macklem recently highlighted trade uncertainty as a significant threat to Canada’s economic stability. His cautious remarks underscored the risks posed by the U.S. approach to trade policy.

Looking ahead, even if the Supreme Court rules against the IEEPA tariffs, Canada may still face ongoing challenges. A narrow ruling could leave other statutes intact, resulting in continued uncertainty and no clear path to restitution. This situation could mean that Canada remains vulnerable to the shifting doctrines of U.S. trade law, with the potential for ongoing economic repercussions.