President Trump imposes 50% tariff on Canadian goods

[00:00:00]President Trump started the week by imposing a 50% tariff on Canadian goods coming from that country. He declared Canada has unfairly discriminated against American autos, alcohol, and dairy products. The administration is using a different legal strategy this time, instead relying on a trade law from the 1930s. This also comes after the Supreme Court struck down many of Trump's tariffs earlier this year. Now, we're going to explain more on this with Michelle Schultz. She is the founder and managing partner of Schultz Trade Law, which is based up in Dallas. Michelle, welcome to our show and thanks for being with us today.

[00:00:38]>> Thank you. Thank you for having me.

[00:00:40]>> I want to begin by talking about the law that President Trump says he's now going to use to impose these new Canadian tariffs. Help us understand what that involves exactly.

[00:00:52]This is a new tool in the toolkit that we haven't quite seen used before in all these tariff wars. Um, this is section 338 of the trade act of 1930. And section 338 is intended to alleviate the burden of discrimination against the United States. The argument here is that Canada has been discriminating against the United States by imposing retaliatory tariffs against the US in alcohol, dairy, and automobiles.

[00:01:30]This is is is an existing topic because dairy has been the subject of discussion for a long time with the USMCA. We already knew that Canada was imposing tariffs, but we've seen a little bit more tension recently when Canada imposed tariffs on liquor when they started indicating whether alcohol on the shelves was US or Canadian. So, I think it's it's spiked a little more tension recently and now the US is calling it discriminatory.

[00:02:07]And Michelle, how is that different than previous tariffs that the Trump administration enacted?

[00:02:14]>> We've seen different sections of different sets of regulations used before. Uh we saw the IEPA tariffs. The International Emergency Economic Powers Act was used to impose tariffs that were considered used in an emergency. And the Supreme Court shot those down. Those were the 10% baseline tariffs that were on pretty much every country. We have also seen section 301 used and that's the set of tariffs that are used for unfair trade practices. Those are still being used against China, Vietnam, even Germany for pharmaceuticals. And we're currently seeing a big shift where 301 tariffs are being used for forced labor practices.

[00:03:04]Then finally, section 232, that's another tool that's being used for um for unfair pricing with metals, steel, aluminum, copper. So, this is a brand new one. It's a brand new one for discrimination and it's a broad provision that has not been used before.

[00:03:25]So, I think we may see this one used again. Yeah, Michelle, given that this is so new, as you just mentioned, do you think that this could potentially survive a court challenge? Of course, we don't know yet if there will be any kind of legal challenge mounted against these tariffs, but can you speculate on that just a little bit? Could it perhaps work?

[00:03:45]>> I think it could work. We have seen all of these new uses of tariff provisions running through the US Court of International Trade, Courts of Appeal, um the US Supreme Court, and we've seen decisions for and against. This particular one is unique in that it hasn't been used before. It had been contemplated in the past, but really never wielded. I think that it could stand. It's possible that it could stand. There's no doubt in my mind that attorneys, especially trade attorneys, will fight it.

[00:04:22]>> Okay, that was my next question was, do you expect a legal challenge to be mounted at some point? Because we've seen that pattern happen with some of the previous actions.

[00:04:31]>> Yes, I do. Um, I think that trade is being enormously impacted by all these tariffs. US importers are the ones paying the tariffs and the more we retaliate, the more Canada will retaliate. So if we're going to impose 50% now on imports of dairy, auto, um, cement, we've got, you know, a wide variety of products coming in from Canada and a few exclusions as well.

[00:05:04]importers will be struggling to determine if their products are excluded, if they're not excluded, and many importers will fight this. I think it will go to the court of international trade >> and we will of course have to keep watching that. Um, you spoke there about the costs of these tariffs and I want to highlight something that I read just earlier today. So earlier this year, the Federal Reserve Bank of New York found that American consumers and companies shouldered the cost of almost all 90% of President Trump's import taxes previously. So my question to you is, do you think that these new ones leveled against Canada uh could result in Americans paying higher prices?

[00:05:46]>> Absolutely. I do.

[00:05:48]>> The US importers are the ones that typically trade attorneys represent. So people like myself represent the importers of the parts and components that go into products we manufacture and sell. Those importers complain to us every day that they can't afford to absorb these costs. And even though we may want to manufacture here in the US, the problem is the parts and components are expensive and the infrastructure may not be here. So, Canadian dairy for example, um are we ready to make all dairy here to produce all cheese here?

[00:06:28]Maybe we are, but it's going to change the landscape for US importers and US food and a it's also going to change the prices at your grocery stores and it's going to change the prices for your your products unless you're excluded. Well, we are unable to talk about all the implications on this as we look to see how this is implemented moving forward, but um Michelle Schultz, thank you so much again for sharing your insight and expertise in the subject matter. We so appreciate it.

[00:07:01]>> Thank you. Thank you for having me. All right, we'll be right back after