Carney government's retaliation may weaken the legal case against Trump's tariffs, think tank argues

OTTAWA — The Carney government’s latest round of counter-tariffs may weaken the legal case against the Trump tariffs, because they directly discriminate against American imports, a new think tank report says.

In a report to be released Wednesday, the Montreal Economic Institute (MEI), wrote that U.S. President Donald Trump’s recent tariffs against Canada may rest legally on 1930 legislation that is often blamed for almost immediately fuelling the Great Depression.

But that legislation, the Smoot-Hawley tariff, states that American tariffs are to be used to fight back against discriminatory tariffs from another country, perhaps such as those launched earlier this month by Canada.

Ilya Somin, a law professor at George Mason University in Arlington, Va. and one of the authors of the MEI report, said he understands the political pressure to fight back against the Trump tariffs against Canada, but that the counter-tariffs are not without risk.

Counter-tariffs are by definition discriminatory, he said, which could legally justify Trump’s tariffs and therefore threaten the legal argument against them.

“Ideally, they shouldn’t do this but i do recognize there are political advantages,” said Somin, who is also a senior fellow at the MEI.

U.S. opponents could certainly still win a legal argument against the Trump tariffs, Somin said, but it’s far from certain.

“It is hard to predict how a court would handle this particular point,” the report concludes.

In July, Trump imposed 50 per cent tariffs on a range of Canadian imports and then expanded the list a month later. Canada responded earlier this month with counter-tariffs at the same rate on a basket of American imports.

While Trump hasn’t directly invoked Smoot-Hawley to justify any of his various tariffs, that legislation from 96 years ago did establish a precedent of sorts in allowing a president to adjust tariff rates that had already been approved by Congress if discrimination were involved.

The MEI report acknowledges that these latest rounds of Trump tariffs could be struck down in court despite the Canadian counter-tariffs because the 1930 legislation has since been supplanted by more recent legislation. The document describes the Trump tariffs, which have caused harm to a number of Canadian businesses and sectors, as “harmful, illegal and indefensible.”

The MEI isn’t alone in questioning the Carney government’s counter-tariffs.

Economists have said that tariffs and counter-tariffs cost both sides because they raise prices and make both economies less efficient.

Industry Minister Mélanie Joly has said Ottawa’s counter-tariffs will help Canadian negotiators in future talks with the U.S.

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