Tariffs: Supreme Court judgment is good news, but not the end of our trade woes

• Section 232 tariffs and CUSMA renegotiations still weigh on our economy.
• Unilateral reduction of trade barriers with the rest of the world could boost the Canadian economy.

Montreal, February 20, 2026 – The Supreme Court has dealt U.S. consumers and trade partners a win by finding some of the Trump administration’s tariffs illegal, but future access to the American market is still tenuous, points out the MEI.

“While today’s ruling is great news for free trade around the world, its impact on Canada remains limited; we’re not out of the woods yet,” says Gabriel Giguère, senior policy analyst at the MEI. “The court’s ruling doesn’t affect products such as steel, aluminum, or softwood lumber, which are subject to tariffs under a different mechanism.

“And let’s not forget that we’ve got the CUSMA renegotiations coming up this year, with a protectionist U.S. administration.”

Under the pretence of protecting the U.S. from illicit drugs coming from Canada, the American government invoked emergency power, under the International Emergency Economic Powers Act of 1977 (IEEPA), to impose 25 per cent tariffs on Canadian imports.

The same mechanism was used to impose tariffs on products from trade partners all around the world, including the uninhabited Heard and McDonald Islands. The Court ruled that this was illegal.

In Canada, the vast majority of products targeted by IEEPA tariff measures were protected from its impact, as they could be covered by the Canada-United States-Mexico Agreement.

In June, U.S. President Donald Trump used Section 232 of the Trade Expansion Act of 1962 to increase tariffs on imports of steel, aluminum, and derivative products from 25 to 50 per cent.

Tariffs on Canadian softwood lumber and derivative products were later increased to 45 per cent under the same mechanism. Other products such as automobile parts and copper are also subject to tariffs under Section 232 of the Trade Expansion Act of 1962. These levies were not affected by the Court’s ruling.

The U.S. is Canada’s largest market for aluminum. Combined steel and aluminum exports to the U.S. totalled $35 billion in 2024, representing one per cent of Canada’s GDP.

For the time being, 98 per cent of Canadian exports to the U.S. are covered by the Canada–U.S.–Mexico Agreement. The trilateral trade agreement goes into mandatory review on July 1, 2026. President Trump has repeatedly talked about upending the agreement.

“The Carney government rightly recognizes that salvaging our trade relationship with the United States will be a key determinant of Canada’s prosperity, but we could certainly do more,” says Mr. Giguère. “While we’re doing better than the U.S. in this regard, we still impose quite a few tariff and non-tariff barriers on the rest of the world.

“Lowering those could also help improve the prosperity of our workers and businesses.”

In a report published last March, the MEI pointed out that a unilateral lowering of our barriers to international trade could boost our GDP by an estimated 1.7 per cent, and reduce the general price level by around 1.5 per cent.

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The MEI is an independent public policy think tank with offices in Montreal, Ottawa, and Calgary. Through its publications, media appearances, and advisory services to policymakers, the MEI stimulates public policy debate and reforms based on sound economics and entrepreneurship.

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