U.S. Supreme Court strikes down IEEPA tariffs, while Canada braces for looking CUSMA negotiations

On February 20, in a largely anticipated and seminal decision, the Supreme Court of the United States (SCOTUS) struck down the use of the International Emergency Economic Powers Act (IEEPA) as the basis for the Trump administration’s sweeping global tariff policy. IEEPA accounted for approximately 60-70% of the tariffs implemented since April 2025 and in place at the time of the decision, and as such this represents a meaningful challenge to the government’s trade agenda and policies. In effect, it prevents President Trump from weaponizing IEEPA as a blunt-force object to implement tariffs on a sweeping and immediate basis to affect a targeted restructuring and reorientation of U.S. foreign trade.

To be clear, this ruling does not eliminate U.S. tariffs, but rather forces a broader procedural framework around tariff policy going forward. According to RBC Global Asset Management (RBC GAM), without IEEPA the effective tariff rate on U.S. imports falls from 13.6% to 7.6% (prior to any replacement tariffs – more on this shortly).

One might liken the introduction of this procedural framework to a more scalpel-like approach to tariff policy – i.e., it will take time for the Trump administration to implement a more durable and legally based tariff policy. That said, the Trump administration – fully expecting that SCOTUS would rule against its use of IEEPA – had been seeking alternatives since the Court began reviewing the case. Several other sectors and/or products that were previously covered by IEEPA remain under investigation for reclassification to other forms of tariffs. There are, in fact, several other avenues vis-à-vis trade law that the administration is considering, as summarized here:

No sooner had the decision by SCOTUS been released, that Trump sprang into action and signed an executive order invoking Section 122 of the Trade Act of 1974 to impose a 10% global tariff (which he later threatened would go to 15%, though this remains to be confirmed at this time). However, this legislation only allows the tariff to remain in place for up to 150 days, after which Congressional approval is required. We surmise that the use of the more restrained Section 122 tariffs may serve as a placeholder while the administration explores how other sections could be appropriated to enforce more sustained tariffs over the medium to long term. Some haste on this front is likely owing to the looming November 2026 mid-term Congressional elections, and Trump’s desire to demonstrate a “win” to support and justify his preeminent economic policy thus far into his second term.

Following the issuance of the executive order under Section 122, the new effective global tariff rate lands at 10.6% (based on RBC GAM’s estimates), provided the 10% baseline is maintained. Should the administration ultimately opt for 15%, the effective rate would increase to 12.1%. Still, both estimates are better than the aforementioned 13.6% tariff rate that was in place under IEEPA.

Cheques in the mail! Tariff refunds are not as a simple as a 30-day “money back” guarantee, but are an economic tailwind nonetheless

In SCOTUS’s ruling striking down the IEEPA tariffs, there was no decision regarding importers’ eligibility for refunds. However, in early March, the U.S. Court of International Trade (CIT) ordered refunds for all importers that had been subject to the tariffs. The Department of Justice (DoJ), to no one’s surprise, sought a stay of that decision pending appeal, though this was denied. An appeal of the refund order can still be pursued, however, at the time of writing, no such decision has been made.

According to a recent New York Times report[TB3] , the administration has said it could take the government as many as “4,431,161 hours” to manually process all the refund requests. It estimates there were more than 53 million entries for goods subject to the IEEPA duties now deemed illegal. Returning this money, would take time and we are not holding our breath that Trump intends to make the refund process easier.  [TB4] [TA5] In contrast, [TB6] U.S. Customs and Border Protection (CBP) has indicated that issuance of refunds could begin as early as late April, pending certain technological system updates. Still, we believe uncertainty remains regarding whether refunds will be paid in full and how long the process will take[TB7] [TA8]  given the enormity and complexity of the undertaking. We remain cautious as to whether it will be resolved folly and fairly in favor of the tariff payers

Setting aside the potential for an extended timeline for settling importers’ refunds, in our view such an injection of capital back into the economy represents a fiscal tailwind for the U.S. economy. According to the CBP, more than $160 billion in tariff revenue was collected from importers under IEEPA, which based on RBC GAM’s estimates would amount to roughly 0.5% of GDP. This represents a small but meaningful boon to profitability for these importers in the short to medium term. Yet we wouldn’t necessarily expect a similar boost to consumer spending (which usually delivers a more meaningful multiplier effect on the U.S. economy), as many importers have shielded consumers from absorbing the brunt of tariffs thus far. It is worth noting that consumers who ultimately paid the cost of the tariffs through higher prices will not be compensated in any way, unless an eligible company chooses to do so. This sets up another political headache for the Trump administration: corporations seen as “winning” from the these now illegal tariffs at the expense of average (and many of them financially struggling) Americans.   

For now, we believe the decision by SCOTUS to strike down IEEPA is a net positive on the whole. The introduction of a procedural framework deprives the Trump administration from imposing broad-based tariff policy on a whim, or at best on questionable grounds. Arguably, it evidences the existence of some checks and balances between the executive and judicial arms of the U.S. government, even against the backdrop of a conservative-leaning Supreme Court. Lastly, for the immediate term, tariff rates overall have moved lower, potentially providing a release valve on persistent inflationary pressures in the economy. The caveat is some degree of continued uncertainty for U.S. corporations and their trading partners regarding where tariffs will ultimately land in the medium-to-long term, pending the conclusion of the ongoing reviews by the Trump administration and the requisite potential approvals. Still the uncertainty would seem lower than what was the case since April of last year.

[LM9] 

Summer forecast: Hot, sweat-inducing days ahead, as CUSMA remains the key for Canada with negotiations on the horizon

The recent SCOTUS IEEPA tariffs ruling has little impact on Canada, given that the trade we do with the U.S. is broadly covered and protected under the Canada-U.S.-Mexico (trade) Agreement (CUSMA). But this means that the renegotiation of the agreement this summer is far more consequential. In contrast, countries such as China, and Emerging Markets more broadly, stand to benefit more meaningfully from the revocation of IEEPA tariffs.

Still, in Canada specific sectors such as steel, aluminum, copper, and softwood lumberare currently still very much subject to steep tariffs under Section 232. Reports that the Trump administration is considering additional sectoral tariffs aimed at industries such as semiconductors, pharmaceuticals, critical minerals, and commercial aerospace and jet engines, suggest some material near-term risk for Canada. However, the U.S. Commerce Department must conduct a formal investigation and produce a report of its findings in favor of such a move before these tariffs can be implemented.

CUSMA renegotiations on this front have already begun between the U.S. and Canada. As we had indicated in our report from January of this year, we believe that Canada will ultimately secure a “better than feared” outcome on CUSMA 2.0 – though we expect, in keeping with Trump’s style, that the negative rhetoric will amplify leading into the decision; and, that the U.S. will continue to leverage its economic heft and position as Canada’s key trading partner to extract some concessions.

 [TB1]I think this was meant to say Representative?

 [LM2]Labelled as Chart 1 in files

 [TB3]Just added this in so the reader doesn’t have to click through to figure out what the link refers to.

 [TB4]I believe this is no longer the case and refunds are imminent? Just wanted to check on that, as it could save us some space.

 [TA5]I think he is still going to make it messy

 [TB6]If the above is correct, we can change this to: “Case in point, the U.S. Customs…”

 [TB7]Perhaps add:" ...given the enormity and complexity of the undertaking, so we remain cautious as to whether it will be resolved fully and fairly in favour of the tariff payers.”

 [TA8]OK

 [LM9]Labelled as Chart 2 in files

 [LM10]Labelled as Chart 3 in files