Preparing for impact: 5 things to watch for with Trump’s looming tariffs

On Monday, the countries of the world are preparing for an economic crisis. And very few people from Canada are at risk.

That’s because Canada sells three-quarters of everything it sells to the world, and US President-elect Donald Trump is threatening trade penalties. the day he took office.

We know he planned it 100 executive orders starting on inauguration day, it is virtually certain that they will cover trade and border measures.

What we don’t know is the scope, intensity and structure of his promised trade moves. Even Trump’s Republican allies on Capitol Hill aren’t convinced, and public comments suggest the full plan won’t be finalized by Monday.

WATCH | Trump’s threat of 25% tariffs against Canada and Mexico:

Trump threatened Canada and Mexico with 25% tariffs on his first day in office

In a post on his Truth Social platform, US President-elect Donald Trump threatened to impose a 25 percent tariff on all goods from Canada and Mexico until both countries stop the “invasion” of undocumented migrants and drugs crossing the US. border.

“In short. What I’m hearing is, ‘We don’t know what he’s going to do,'” Canada’s ambassador to the US, Kirsten Hillman, told CBC News, describing her conversations with Republican lawmakers and state governors.

“I’d like to say we know what’s going to happen. I suspect we won’t know until Monday,” he said.

Here are five things to look out for.

Which law will it use?

The president has various powers to impose tariffs under US trade laws. No president in modern history has used these laws as aggressively as Trump has threatened.

Canadian-US trade expert Laura Dawson predicts that Trump will apply different tools at different times, in different countries and products.

“I think he’s going to try all avenues,” Dawson said.

These potential tools includes Section 232 of the Trade Expansion Act of 1962 authorizes tariffs on national security grounds, as Trump once did on steel and aluminum.

Then there’s Section 301 of the Trade Act of 1974 — which gives the president the ability to punish unfair practices like Trump and President Joe Biden. both were done with China.

Another part of the 1974 law, Section 122, allows tariffs to reduce trade imbalances. It should be noted here that Trump constantly complains about unbalanced trade.

Finally, there is a tariff weapon that has never been used: the 1977 International Emergency Economic Powers Act (IEEPA) in case of national emergency.

Although no president has ever invoked the 1977 law to impose tariffs, it has an attractive quality for a die-hard protectionist: it works quickly.

Implementation of the IEEPA first requires the president to declare a national emergency; Trump clearly alluded to one when he complained about border violations with Mexico and Canada.

“If they want to push the limits of what’s legal, they can try,” said Simon Lester, a trade lawyer, analyst and one-time World Trade Organization official.

“They could just say, ‘Hey, IEEPA gives us this authority.’ We apply 10 percent tariffs worldwide or on these specific products. Let’s see what the courts have to say about it,” Lester said.

All other laws carry certain burdens: for example, sections 232 and 301 require some kind of investigation, and the use of Section 122 is limited to 150 days. Trump may invoke these laws for some of his actions.

WATCH | “There are no borders in the car,” says an industry leader.

An auto parts industry leader says tariffs of 25% will make it pointless to be in business

Supply chains in the North American auto industry are so integrated that “there are no borders in the car,” says Flavio Volpe, president of the Auto Parts Manufacturers Association. According to him, the newly elected president of the United States, Donald Trump, “is trying to disrupt the conversation early.”

How much will it grow?

There’s a reason the economic damage estimates vary so much: Trump has been almost comically inconsistent when discussing the size of his tariffs.

Now he is threatening to impose 25 percent tariffs on Canada and Mexico, which would be devastating and, if applied to the entire economy, would cause a sharp recession.

But he’s been all over the map since the start of the last presidential campaign, even switching between different arguments about tariffs in recent weeks.

“We’ve heard 10 percent universal (tariffs), 20 percent universal, 60 percent in China, 40 percent in China, 100 percent on cars, 200 percent, 1,000 percent,” the US federal budget said. expert Mark Goldwyn.

“I think we all made fun of it, but I get it,” Goldwyn said.

He says that Trump has made it clear in his public appearances that he has not set any specific numbers. It is going to use tariffs to achieve certain things.

Even if the tariffs are in place for a short period of time, Dawson said, any significant tariffs in Canada would have long-term damage.

“It drives investment south. It stalls manufacturing decisions,” he said.

He is already hearing that international companies are considering moving some production from facilities in Canada to facilities in the United States. There is a Honda he thought publicly About reducing production in Canada.

How fast will it go?

There are reasons to believe we won’t get the full picture on Monday. There was various the media leaks The ongoing debate within Trump’s inner circle and his nominee for treasury secretary hinted at congressional hearings that the full policy is still being worked out.

Plus, there are benefits to going slow.

One is to test market reaction and not risk a crash on Day 1 of his presidency. With that in mind, there are some helpers reported It calls on Trump to start with a small tariff and gradually increase it by two percentage points each month.

Scott Lincicome, a trade lawyer and analyst, expects a gradual rise. He says he envisions limited action on Day 1: perhaps tariffs on China, plus some announcements to start the process for additional tariffs.

For example, he said, Trump could declare a national emergency under the IEEPA or launch months-long investigations under Sections 232 or 301. Then he would use all this as a bargaining chip.

“These allow Trump to run around the world threatening everyone without actually harming the economy. That is, it will harm the economy – invisibly. The uncertainty of trade policy harms investments,” Lincicome said.

“(This puts Trump in the middle of the Trump Show without imposing tariffs on Ford Festivas from Mexico and auto parts going to BMW in South Carolina.”

Another argument for going slow: the budget process. Later this year, Republicans in Congress are preparing a bill to cut taxes.

It’s complicated and it involves process For bypassing the Senate’s three-fifths filibuster rule and passing the budget bill with a simple majority.

To make the tax cuts permanent, the bill is not allowed to be added to the deficit; tariff revenues would helpAccording to a document drafted by Republican lawmakers.

It’s a long shot. Republicans in Congress now insist that is not their plan. Enough of them still dislike the tariffs that an attempt to enshrine them in long-term law could kill the bill in a close vote.

“Tariffs will not be legislated,” Lincicome said.

But according to Goldwein, it’s too early to be sure. He says Republicans are desperate to pass tax cuts, and he says, “They’re going to try anything.”

What is Trump’s goal here?

Trump’s tariffs have three goals, his nominee for Treasury secretary said in his Senate confirmation hearing last week.

Scott Bessent, speaking specifically about China and steel, is to eliminate unfair trade practices by industry or country.

Second: increase income. “For the federal budget,” said billionaire financier Bessent.

And finally, there’s the art of the deal. “For negotiations,” he said, explaining that tariffs can be used as leverage on other countries instead of sanctions, something Trump believes are being overused.

See how Canada responded. The tariff threat has prompted Canada to announce a laundry list of policies related to border security, immigration, fentanyl trafficking and organized crime.

Bessent did not specifically mention Canada. But he referred to Mexico and fentanyl when talking about the tariffs.

What can stop Trump?

Don’t trust the courts. Trade experts interviewed for this story and others writingthe vast majority call him difficult Claims against Trump will succeed, he said.

Judges have mostly given presidents a reprieve on issues related to national security and tariffs, they said. Congress also added these presidential powers to law during the Cold War.

If Trump has any sort of safety net — any checks at all — look elsewhere. According to Lincicome, the biggest one is the market.

Lincicome said Trump would not like to start his presidency with a stock market crash amid negative economic headlines.

And the market doesn’t expect big tariffs based on its current behavior. Lincicome said he expected tariffs on China and several critical goods.

“It’s not a giant global tariff. It’s not 25 percent tariffs on avocados from Mexico,” Lincicome said. “(Trump) wants to avoid a million stories about Trumpflation. About guacamole prices going up before the Super Bowl,” he said.

“I think it will act as a check.”

To be clear: If the Trump barrel moves forward, the courts will fly. According to Lincicome, even if these lawsuits are successful, they could take months or years to dismiss.

“By the time the court goes through, the damages have already been paid,” he said.