Trump’s 10% tariffs kick in as Canada braces for trade chaos

Trump’s 10% global tariffs went live at midnight, slamming Canadian exporters while everyone’s still picking through the wreckage from Friday’s Supreme Court bombshell that nuked his bigger trade penalties.

The president inked the executive order late Friday using Section 122 of the Trade Act of 1974. Now he’s talking about bumping that 10% up to 15%.

Canadian businesses are waking up to a whole new world. Every single shipment heading south gets dinged with the levy. Softwood lumber folks, steel producers, auto parts makers. They’re all paying extra now.

Talk about lousy timing for Canadian exporters. February’s when spring shipping season traditionally kicks off – manufacturers usually ramp up production for summer demand.

Instead, companies are crunching numbers on how much extra they’ll fork over for every border crossing.

Supreme Court Ruling Flips the Script

Here’s where things get really messy. The Supreme Court threw out Trump’s original tariffs on Friday, saying they were illegal under the International Emergency Economic Powers Act. So US Customs stopped collecting those duties Monday.

But Trump wasn’t having it. Hours after the ruling, he signed new tariffs using different legal muscle. Section 122 lets him slap on tariffs up to 15% for 150 days to tackle trade deficits.

After 150 days? Congress has to sign off on any extension. That’s something, at least.

The Supreme Court’s 6-3 decision said Trump’s original “Liberation Day” tariffs went way beyond what presidents can do under IEEPA. Chief Justice Roberts wrote that trade moves need way more specific approval from Congress than what the administration gave.

Legal eagles say Section 122 gives Trump steadier footing, but it’s got time limits and congressional babysitting that his old tariffs didn’t have. The Trade Act of 1974 specifically lets presidents throw temporary duties up to 15% when they’re dealing with balance-of-payments problems.

The Numbers Are Brutal for Canadian Exporters

Canadian exporters are staring at billions in fresh costs. That 10% tariff hits everything going south. Steel, aluminum, lumber, farm stuff, manufactured goods.

Companies like FedEx are already in court demanding refunds on the old tariffs that got axed. They want their money back, and they’re first in line.

Economists figure over $100 billion might flow back to importers over the next few months from those invalidated tariffs.

The math’s pretty savage for Canadian businesses. Steel exports to the US hit $4.2 billion last year. A 10% tariff means Canadian steel companies face $420 million in extra costs every year. Lumber exports worth $8.1 billion now carry an $810 million burden.

Auto parts? That’s an even messier story. Canada shipped $18.6 billion in automotive components to the US in 2025. Thing is, North American auto manufacturing is so integrated that some parts cross the border multiple times during production, getting whacked with tariffs at every crossing.

FedEx dropped its lawsuit in federal court in Memphis on Monday, going after $47 million in refunds from those invalidated tariffs. The company paid duties on aircraft parts, electronics, and other shipments under Trump’s original trade penalties.

“We paid these tariffs under protest and kept detailed records specifically for this scenario,” said FedEx spokesperson Jenny Garrett. “The Supreme Court has vindicated our position that these duties were illegally imposed.”

Agriculture’s facing particularly steep challenges. Canadian canola exports to the US were worth $3.8 billion in 2025. The 10% tariff makes Canadian canola way less competitive against domestic US production, potentially costing prairie farmers hundreds of millions in lost sales.

Trade Deals Are Falling Apart

The European Union hit pause on ratifying their trade deal with the US, saying they need “full clarity” on Trump’s next moves (to put it lightly). EU officials later said Trump’s new tariffs probably break their agreement anyway.

Japan’s not thrilled either. Trade Minister Ryosei Akazawa asked the US to make sure Tokyo doesn’t get worse treatment than what they agreed to last year.

“These sudden changes in US trade policy create uncertainty that damages the foundation of international commerce,” Akazawa told reporters in Tokyo on Tuesday. “We expect our American partners to honor existing agreements while pursuing their domestic objectives.”

Look, this hits Canada too. Our trade relationship with the US is worth over $780 billion annually. Any disruption smacks both sides of the border.

The EU’s trade deal, signed just six months ago, included specific rules limiting US tariff power on European goods. EU Trade Commissioner Valdis Dombrovskis said Tuesday that Trump’s Section 122 tariffs seem to break those commitments, potentially triggering dispute resolution stuff.

European lawmakers were supposed to vote on the trade deal ratification this week, but they postponed the session indefinitely. The agreement covers $200 billion in annual trade between the US and EU, making it one of the biggest trade pacts in global commerce.

Canada doesn’t have the same recent trade agreement protections. The USMCA includes some dispute resolution procedures, but Section 122 tariffs might fall outside those frameworks, leaving Canadian exporters more exposed than European competitors.

Canadian Dollar Takes a Hit

The tariffs aren’t just hammering exporters. They’re messing with Canada’s entire economic outlook and currency markets.

Let that sink in.

The Canadian dollar dropped 1.2% against the US dollar in early trading Tuesday, falling to 72.4 cents US. Currency traders are pricing in reduced competitiveness for Canadian exports and potential Bank of Canada policy responses.

Inflation worries are climbing too. Canadian businesses importing US goods face the same 10% tariff, costs that usually get passed to consumers. Statistics Canada estimates that broad-based tariffs could add 0.3% to 0.5% to Canada’s inflation rate within six months.

The Bank of Canada bumped its overnight rate to 3.75% just last month, partly to fight inflation pressures. These new tariffs complicate monetary policy by adding cost-push inflation while potentially slowing economic growth through reduced trade.

Manufacturing sectors show the clearest immediate hits. Ontario’s automotive cluster employs 125,000 people directly and supports another 400,000 jobs indirectly. The tariffs threaten that integrated supply chain model that’s driven North American auto production for decades.

Magna International, Canada’s biggest auto parts manufacturer, estimates the tariffs will cost the company $23 million quarterly based on current export volumes. CEO Swamy Kotagiri said the company’s reviewing supply chain alternatives and considering price increases to offset the duties.

What This Means for Regular Canadians

Canadian exporters are scrambling to figure out the new math. A 10% tariff on a $100,000 shipment means an extra $10,000. Scale that up across thousands of companies and millions of shipments.

The auto sector gets hammered especially hard (to put it lightly). Parts cross the border multiple times during manufacturing. Each crossing costs more now. Honestly? This puts pressure on the Canadian dollar too. When trade gets pricier, it affects currency values and inflation.

Prime Minister Trudeau’s office hasn’t put out a formal response yet. But sources say they’re watching closely and considering hitting back.

Regular Canadian consumers won’t dodge these impacts. Grocery prices could climb on imported US agricultural products, from citrus fruits to processed foods. Electronics, clothing, and household goods imported from the US will cost more as retailers pass tariff costs to customers.

The housing sector faces indirect pressure too. Canadian lumber exports to the US support 230,000 forestry jobs, mostly in British Columbia and Quebec. Reduced competitiveness could mean job losses in forestry communities, affecting local housing markets and economic activity.

Fair point.

Energy exports present tricky calculations. Canada exported $156 billion in energy products to the US last year, mostly oil and natural gas. If Trump expands tariffs to cover energy, it would fundamentally reshape North American energy integration.

Small and medium businesses face particular headaches. Large corporations can hire trade lawyers and restructure supply chains. Smaller Canadian exporters often lack resources to handle complex tariff systems or find alternative markets quickly.

The Canadian Chamber of Commerce estimates that 40,000 small and medium enterprises export regularly to the US. Many operate on thin margins where 10% additional costs could determine whether they survive.

The 15% Threat’s Still Out There

Trump’s team is reportedly working on raising the tariff from 10% to 15%. That’d make things way worse for Canadian businesses already dealing with higher costs.

Word is the administration’s launching new national security investigations to justify broader tariffs. They’re hunting for legal ways to bring back the trade penalties the Supreme Court struck down.

The bigger picture: Trump wants to address what he calls a balance-of-payments crisis. Some economists say that crisis doesn’t exist, which could make these tariffs vulnerable to more legal challenges.

Section 232 investigations under national security provisions could target specific Canadian industries. Steel and aluminum already faced these measures during Trump’s first term, with Canada eventually securing exemptions through diplomatic negotiations.

The administration’s reportedly examining critical minerals, forestry products, and energy exports for potential national security implications. Such investigations typically take 270 days but can justify permanent tariffs without congressional approval.

Trump’s economic advisers argue that the US trade deficit of $773 billion in 2025 represents a balance-of-payments crisis requiring emergency action. The US imported $429 billion more in goods than it exported, with services trade providing only partial offset.

Canada contributed $43 billion to that trade deficit, making it the fourth-largest source after China, Mexico, and Germany. Trump’s team views tariffs as tools to rebalance trade relationships and encourage domestic production.

But mainstream economists question whether trade deficits constitute economic emergencies. The Peterson Institute for International Economics argues that US trade deficits reflect domestic savings and investment patterns rather than unfair foreign practices.

Some Winners, Lots of Losers

Canadian companies face clear disadvantages under the new system. But there might be some benefits for domestic producers competing with imports.

Steel and aluminum producers in Hamilton and Sault Ste. Marie could see demand increase as US buyers look for alternatives to higher-priced imports.

Agriculture’s trickier. Canadian farmers export billions to the US annually. The 10% tariff makes their products less competitive against domestic US producers. The energy sector faces questions too. Oil and gas exports could get caught up if Trump expands the tariffs to cover more products.

ArcelorMittal Dofasco in Hamilton expects increased orders from US customers seeking to avoid tariffs on offshore steel. The plant operates at 85% capacity currently, with room to increase production by 200,000 tonnes annually without major capital investments.

Algoma Steel in Sault Ste. Marie faces a different situation. The company exports 60% of production to the US, meaning tariffs hurt more than potential domestic gains help. CEO Michael McQuade said the company’s evaluating price increases to offset tariff costs.

Canadian mining companies with US operations gain competitive advantages. Teck Resources produces copper and zinc in both countries, potentially shifting production emphasis based on trade policies.

Service sectors remain largely unaffected by goods tariffs, giving Canadian banks, insurance companies, and consulting firms unchanged competitive positions in US markets.

Tourism could benefit if a weaker Canadian dollar makes visits more attractive to US travellers. The 1.2% currency decline effectively discounts Canadian vacation costs for American tourists.

What’s Coming Next

Trump has 150 days to make his case to Congress for extending these tariffs. That takes us into summer, right around when midterm election campaigns heat up.

Canadian trade officials are working the phones, trying to get exemptions or special treatment like we had under NAFTA. But Trump’s team hasn’t shown much interest in carve-outs.

The legal challenges will keep rolling in. More companies will sue for refunds on the old tariffs. Fresh lawsuits will target the current ones.

Worth noting: this affects regular Canadians too. Higher costs for imported goods from the US means higher prices at the store. Everything from food to electronics could cost more.

Canadian businesses are already adjusting supply chains, hunting for new suppliers, and passing costs to customers. The ripple effects are just getting started.

The 150-day clock on Section 122 authority creates a July 25 deadline for congressional action. Republicans control both houses of Congress, but some members represent districts dependent on Canadian imports or integrated supply chains.

Senator Susan Collins of Maine, whose state imports significant Canadian lumber and energy, has already questioned whether tariffs serve long-term US interests. House Speaker Mike Johnson said Congress will “carefully evaluate” any extension requests.

Canadian Ambassador to the US Kirsten Hillman’s scheduled to meet with US Trade Representative Katherine Tai this week. Sources say Canada will propose sector-specific exemptions similar to those negotiated during previous trade disputes.

The legal scene remains messy. Constitutional law experts predict more Supreme Court challenges if Trump expands tariffs beyond Section 122 limits or extends them past 150 days without congressional approval.

International arbitration under USMCA dispute procedures could take 12 to 18 months, providing little immediate relief for affected businesses. Canada may pursue interim measures or seek expedited proceedings given the tariffs’ economic impact.

What This Means Going Forward

Global markets are watching closely too. The International Monetary Fund warned Tuesday that escalating trade tensions could reduce global GDP growth by 0.2% this year, with North America facing disproportionate impacts due to integrated supply chains.