Front Burner - Will Trump's tariffs survive the Supreme Court?

Episode Date: December 4, 2025

The U.S. Supreme Court is soon expected to rule on the legality of President Donald Trump's sweeping worldwide tariffs. The court will rule on whether his use of a 1970s national security law violates the U.S. constitution, which clearly states that only Congress has the authority to implement taxes — of which tariffs are a type.But regardless of which way the court rules, Trump and his administration have made it clear that tariffs will continue to be a central pillar of both their economic and foreign policy. And, just over a year after they were first announced, those tariffs have had perhaps no bigger impact than here in Canada. They've reshaped not just our economic relationship with our closest trading partner, but they've fractured the political relationship too.Eric Miller, president of Rideau Potomac Strategy Group, explains what's at stake in the Supreme Court's ruling, and breaks down the impact of a year of Trump tariffs.For transcripts of Front Burner, please visit: https://www.cbc.ca/radio/frontburner/transcripts

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Stream your playlist, scroll, text, navigate, and video call home, all without watching your phone bill explode. Plus, Aero Lo works in over 200 destinations and is trusted by over 20 million travelers. So if you have an international trip, download the AeroA app or visit Aero.com. That's A-I-R-A-L-O-com and use the code Roamsmart for 15% off your first ESIM. Terms apply. This is a CBC podcast. Hey, everybody, I'm Jamie Poisson. Just before we get into today's episode, we're working on a year-end episode over here. So if you have any questions about the biggest stories of the year and how we covered them or an episode of ours that really stood out

to you, we would love to hear from you. You can ask us anything. We'll try to get through as many questions as we can. You can send those questions to front burner at cbc.ca. OK, here is today's show. Late last week, Donald Trump posted a long statement on true social defending his tariff regime. It's something that he's done many times before. He said that tariffs are the key to rebuilding the American economy. He's claimed that they could eventually replace income tax. He's promised every American, a $2,000 dividend, Czech in 2026. Economists and other experts have cast serious doubts on all of these claims.

But that true social post from last week ends with something notable, a direct appeal to the nine justices of the U.S. Supreme Court, urging them to, quote, show great wisdom in an upcoming ruling that could determine the legality of his tariffs. So what exactly is the Supreme Court deciding? What happens if the court rules Trump's tariff program illegal? And one year into Trump's trade Revolution? What has the impact been on Canada? We're joined today by Eric Miller. He is the president of the Rito Potomac Strategy Group, which is a consulting firm that advises clients on international trade. He's consulted with governments on the development of a number of free trade agreements and joins us today to talk about the Supreme Court and Trump's tariffs when you're on.

Eric, hi, it's great to have you back on the show. Thanks for joining me. having me, Jamie. I actually always find talking about terrorists with you so clarifying. So it is really great to have you. Back in November, the U.S. Supreme Court heard arguments about the legality of these tariffs that Trump brought in early this year. And we're expecting their decisions sometime in the next few days, I think, or weeks, but before the holidays. And can you break down for me exactly what the court is being asked to decide here? What the court is being asked to decide, is whether or not the president exceeded his authority by imposing tariffs under a piece of legislation called the International Economic Emergency Powers Act of 1977.

That act gives the president the authority to declare emergencies and to regulate commerce during those emergencies. But many would argue that President Trump has gone too far because it goes directly against the power enumerated in the U.S. Constitution in Article I that specifically authorizes Congress to impose taxes and duties and tariffs and things of that nature. So the question is, does the wording regulate commerce actually give President Trump the ability to impose tariffs on everybody in the world if he declares an emergency and feels like it? Right. And just to be clear, It's this central question that the Supreme Court has been hearing arguments for and against.

Yes, that is correct. This is a majority conservative Supreme Court that has so far been very friendly to Trump and the mega agenda. But during the hearings in November, some of the conservative judges seem to express a bit of skepticism about the arguments that Trump's lawyers were making, that essentially he is completely in his right to use this to put the table. tariffs on all these countries? And how significant was that? What did you hear from them? Well, particularly you heard Justice Amy Coney Barrett question the ability of the administration to impose tariffs on everyone in the world. The implication is essentially you would think if there's an emergency, it wouldn't be against every single country on the planet that it would be specific to different jurisdictions. So she had questions about that and expressed skepticism.

Can you point to any other place in the code or any other time in history where that phrase together, regulate importation, has been used to confer tariff-imposing authority? You also had Justice Neil Gorsuch, who raised questions about the ability of Congress to abdicate its responsibility to the executive branch. Congress is a practical matter. Can't get this power back once it's handed it over. The president's a one-way ratchet toward the gradual but continual accretion of power in the executive branch and away from the people's elected representatives. And asking these questions was both doing the job that they're required to do as Supreme Court justices. But when we talk about conservative justices, we have to remember that the definition of conservative has changed over time. Many of these justices were trained, came up academically and in the legal profession in light of the Reagan Revolution. And so their

view was that limited government and free trade were a good thing. And well, they may have been put on the Supreme Court by Donald Trump. It doesn't necessarily mean that they will go along with everything he does. They have indeed been very friendly to him, including by saying anything that is an official act, an office is legal. It has decided that Trump has immunity from prosecution for official acts as president, but that immunity does not extend to unofficial or private acts. When he spoke to supporters on January 6th, was he officially acting as the president or as the losing candidate? We fight like hell. And if you don't fight like hell, you're not going to have a country anymore. Donald Trump cannot now be prosecuted for all the conversations in which he had been

pressuring Mike Pence to overturn the election results. But this may be an area where they express skepticism, and then, of course, if they strike down the tariffs, what happens to the $100 billion-plus dollars in duties paid under these imposed tariffs, and do those get refunded? If they do strike this down, what would happen to the tariffs themselves? Do all of them just go away? No. So the president has imposed different tariffs under different instruments. So the so-called fentanyl tariffs on Canada, for example, or the so-called Liberation Day tariffs on the rest of the world. those were done under the so-called AEPA tariffs that we discussed earlier, the 1977 Act, whereas things on steel and aluminum and autos and the new 10% levy on softwood lumber on top of the existing tariffs on softwood lumber, those are using Section 232 of the Trade Act of 1962, completely separate vehicle, one that has been much more rigorously tested from a legal perspective, and those

would stay in place. And so the general application tariffs that you've seen would be the ones that were put in question. And then, of course, you would think, and Scott Besson, on the day we're recording, has indicated that the administration intends to turn to other trade acts in order to effectively keep the tariffs in place, regardless of what the Supreme Court thinks. Right. They have some kind of backup plan, some other kind of law that they're going to use to push the tariffs through. So materially, it could change absolutely nothing. So I know Costco has brought a lawsuit against the Trump administration asking for a refund of the money that they've been paying in tariffs.

Costco is just the latest, but certainly not the only company, looking for a big refund. Global Cosmetics Giant Revlon, motorcycle manufacturer Kawasaki, and canned food seller bumblebee are among the companies filing similar suits. Just talk to me a little bit more about what's happening on that front. So at the end of the last fiscal year, which in the U.S. ended on September 30th, the United States had collected roughly $195 billion in tariffs total. Of that, roughly half were from these IEPA tariffs. The best estimate I've seen now, if you fast forward to the day of recording, we're roughly in the $110 to $15 billion range in terms of tariffs collected. And so you would think that the administration would be obligated to refund those tariffs.

And the Supreme Court could very easily say, we rule them illegal going forward, but every bit of money paid to date has to stay with the government and cannot be refunded. So this is a really big question because that $100 billion plus dollars is, you know, a tenth of the U.S. defense budget. It's an absolutely mammoth sum of money, which if companies are able to claim that, then they would be very, very happy. And Costco, as a major retailer, would be looking at a very big payday. But the government is very much looking at not wanting to do this. So, well, the court may not be obligated to rule on what happens to duty refunds. They could refer this back to the lower court or they could provide guidance themselves.

But this will be a central question if they strike down the tariffs as to what happens to money paid to date. Has Costco really been paying these tariffs, Eric, or are customers paying the tariffs, ultimately? So for many things, Costco is what's called the importer of record. So they are the legal importer into the United States. And so they pay those tariffs at the time that those goods, enter what they call the commerce of the United States. So when they cross the U.S. border and go to a Costco warehouse. And what you've seen behind the scenes is an extraordinary effort by companies to figure out how to absorb the cost of tariffs. And in some cases, they haven't been able to,

and they've just raised prices. And in other cases, they've changed suppliers or cut payments to suppliers. And some have been headcount reduction. Some have been just simply eating the tariffs. and we saw early on when these tariffs were imposed, the CEO Walmart came out and said, well, we're going to have to raise prices if you don't remove the tariffs. We will do our best to keep our prices as low as possible, but given the magnitude of the tariffs, even at the reduced levels announced this week, we aren't able to absorb all the pressure given the reality of narrow retail margins. And Donald Trump essentially called him.

him out. U.S. President Donald Trump on Saturday said Walmart should, quote, eat the tariffs imposed by his administration on imported goods instead of hiking prices for its consumers. So the effect on CEOs is, oh, maybe we shouldn't announce our plans because it won't have any effect. Maybe we should just raise prices behind the scenes. You know, it's interesting listening to you talk about that as well, because it does illuminate that it's not other countries that are direct. paying these tariffs, as Trump likes to imply. But in fact, a lot of U.S. companies themselves, and I think that's a good pivot for us to get into what kind of effect these tariffs have been having inside the United States. I'm a bit of a spontaneous traveler, and I don't always know where I'm going to be or how long I'm going to be there.

And that's where Aeroa comes in. An e-sim from Aerolo allows me to get internet coverage, whether I need it for a specific country, an entire region, or globally. It's easy to set up and I can top up as I go without having to swap out SIM cards. It's the perfect way for me to stay connected. Just download the Aeroa app, pick your destination ESIM, including plan length and data amount, install, and you're connected the moment you land. No surprise roaming fees, no airport kiosks, or sketchy public Wi-Fi.

Instead, just pay for the data you need. Stream your playlist, scroll, text, navigate, and video call home, all without watching your phone bill explode. Plus, Aero Lo works in over 200 destinations and is trusted by over 20 million travelers. So if you have an international trip, download the Aero app or visit Aero.com. That's A-I-R-A-L-O.com and use the code ROMSmart for 15% off your first E-Sim. Terms apply. Give a gift and change a life with giving machines. This holiday season from December 6th through 29th at Sawasin Mills,

you can help those in need with the touch of your finger. Warm meals, winter clothing, and even livestock are available as gifts at the giving machine, with 100% of donations going directly to our sponsor charities. Simply tap, donate, and light the world. For more information, visit www.givingmachine, Vancouver, BC.com. Earlier we were talking about some of the claims that Trump has made. about how great the tariffs have been for the U.S. economy? And just how much truth is there to these claims? Generally speaking, how does the U.S. economy now compare to a year ago? And how much

do you think tariffs account for that? So the U.S. is a 20-plus trillion-dollar economy. So it's absolutely massive. And so the answer is it depends. But some broad trends that we can check out, for example, is the Cleveland Fed did some detailed interviews with a major retailer and found that its cost had gone up 20% since the tariffs had gone into effect. We've seen nine straight months of declines in the so-called purchasing managers index, which is the key indicator of what's happening in U.S. factory. So, in other words, in the manufacturing sector, there has been no Bureau of Labor Statistics report for this past month because of the government shutdown, the official ones due to come out on the

16th of December. But we have seen one of the major payroll processors estimate that the U.S. shed 32,000 jobs. And so there have been a lot of high-profile announcements. Donald Trump has been extraordinarily interventionist in terms of encouraging Dell yesterday to provide six, billion dollars to seed funds for American children to have for investing. In honor of America's 250th anniversary, the Dells are announcing today that they are giving 25 million American children $250 each to save and to invest in their personal Trump account. Now, that's the equipment. He took an equity stake in Intel based on money that the federal government had already committed to provide for a semiconductor manufacturing site.

And so, yes, there have been high profile announcements. Yes, there are people who are looking at going to the U.S. But fundamentally, when I talk to clients, what we've seen for the last year is people scratching their head saying, what do I do? The tariffs keep going up. They keep going down. Canada has been very lucky because it's had the Kuzmo or the USMCA exemption. But in cases like China, where tariffs went to 145 percent, you saw companies essentially paying a dollar 50 for every dollar worth of goods that they were importing. And so you've had just an enormous amount of frustration from companies about what are the rules. How can we navigate this? And so that has led to an environment where a lot of major investment hasn't materialized. And over time, that accumulates

into a slowing down of the economy. And all of the large high-profile announcements of multi-billion dollar investments aren't able to offset that widespread sense of unease and frustration in the economy about not knowing what the rules are, particularly around importing things from the rest of the world. So I know that you said that we have been, Canada, has been somewhat lucky because of Kuzma, lots of carve-outs there that have protected us from enormous amounts of terrorists. But having said that, we still do have quite a few tariffs slapped on us in specific industries. In particular, steel. One of Canada's largest steel companies, Algoma,

handed out a thousand layoff notices today. The layoffs are linked to a major transition in how the company makes steel, now happening a year earlier than planned. Algoma blames the pressure from Donald Trump's punitive tariffs. Otto. At the end of their shift at the Pai-Car Assembly plant, workers said it was a difficult day on the job.

It's very heavy, I mean, yeah. The union says that 300 workers who were laid off here are the latest victims of the tariff war raging between Canada and the United States. Lumber. British Columbia is the second largest exporter of softwood lumber in the world next to Russia. The industry is at a tipping point. This industry that contributes so much to Canada's GDP is facing an existential threat through tariffs that are profoundly unfair.

Lumber producer Interfor announced it slowing down North American production. and shutting down one of its B.C. Mills. And so how would you paint the picture of what has happened to our economy because of the tariffs this year? The tariffs have been utterly disastrous. We saw in the second quarter, for example, in Ontario, 38,000 jobs disappear. If there were 30,000 factory jobs, which are likely not coming back. Now, they will say that there were 18,700 jobs created, but those came from, those were basically part-time positions. So you take full-time factory positions which pay well, those disappear and you get part-time positions working in retail or warehouses or other places, which replace them, which are not middle-class jobs.

You've seen preview to go in Quebec just come out and say 30,000 jobs in the Quebec forestry sector are at risk. because, well, we've been focusing on a lot of different aspects of the trade war. What we saw was the Department of Commerce reset the average duties on Canadian softwood lumber to upwards of 35%. And then President Trump, with his Section 232 tariffs that were introduced from this investigation, where things such as kitchen cabinets were declared a threat to national security. I think that's the first. These kitchen cabinets built in Shediak, New Brunswick, are the latest Canadian goods set to be slapped with U.S. tariffs.

I'm giving it about three months before that business completely dries up for us. Starting October 14th, wood cabinets and vanities will be hit with a 25% U.S. tariff. On January 1st, that rate is set to jump to 50%. But you've seen an additional 10% layered on top of that. And so Canadian softwood lumber exporters are effectively paying 45% on average, which when you compare with New Zealand, which is paying 10%, all of a sudden, the shipping costs and the distance from New Zealand begin to change the equation. And fundamentally, what does this mean? So where does a lot of Canadian softwood lumber go? Goes into housing construction in the U.S., which means the cost of housing has gone up.

If you're in the aluminum sector, 50% is absolutely horrible, even though the United States only has four aluminum smelters in the whole country. And these things are multi-billion dollar many-year processes. And the U.S. has said, well, maybe we'll cut that to 25% if you invest in new smelter capacity in the U.S. Well, something like this wouldn't come online until 2033, probably at the earliest, even if you could find the electricity needed to run such an intensive operation. And so what this means is that the auto sector, which increasingly uses aluminum for light weighting purposes to increase fuel efficiency, obviously the food and beverage sector, certain advanced technology sectors, all of them are having to pay the 50% cost because

the U.S. depends on Canada in very big ways. But what this means is that producers in Canada are really being hit by these tariffs. So even areas where the U.S. would clearly and obviously benefit from integration, they're creating problems for themselves. And then, of course, the auto sector, I worked on the G&N and Chrysler restructurings back in 2008, 2009. And at the time, there was a study that showed that Ontario had 580,000. and jobs in the auto sector. And, you know, it's come down a little bit since then, but this is a sector which really is at the heart, even to this day, of much of the Southern Ontario economy. And so when you begin to see discussions about major declines in investment, and you start

seeing really difficult situations where Canadian content and finished automobiles is so radically disadvantaged, you see people getting really concerned about what's the future of the sector. And even though this is a system which has benefited in many ways, everyone, this is not something that the Trump administration has been willing to accept. And so if you are in one of these special categories, lumber, steel, aluminum, auto, copper, softwood lumber, semiconductors, maybe coming soon, you are in a horrible situation because you are seeing your business model completely upended. You're seeing workers laid off. You're seeing an inability to keep your factories open. And while many people can use the Coosber USMCA exemption, there are a meaningful

number of others who can't. So I know generally, whereas I understand it, the strategy from our government, from Prime Minister Mark Kearney and others has been to try and alleviate some of that pressure on those key industries, right, and then move to a broader renegotiation of Kuzma down the line. But they have been criticized for giving up too much here with nothing in return. the digital services tax, removing retaliatory tariffs, for example. And you're a guy who's so steeped in this. I'd be curious to hear, how effective do you think Carney and this government has been during these negotiations so far? Yeah. So, look, I think the Carney government, they know that they're in a structurally weaker position. And when you're an economy that's meaningfully smaller than another. economy, that's a very, very hard position to start from. But they're trying to play the best hand they have. And one of the things that I give this government enormous credit for is that they are attempting to do something which nobody else in the world has done with this administration,

which is to ensure the continuation of a genuinely reciprocal relationship on the trade front. So people have said, well, the European Union has reached a deal, Japan's reached a deal. So when you look at what that deal is, it means that when a Japanese or a European exporter sends a product to the United States, they face a 15% tariff barrier. When an American company sends a product to Tokyo or to Antwerp, they pay nothing. And that sort of radical asymmetry where their, products are tariff coming into the U.S. market, but U.S. products are not tariff going to their market is not something that works in Canada, where the intensity of commerce is so much

greater. And so what the Carney government is attempting to do is to negotiate a genuinely reciprocal deal, which none of the other major trading powers in the world have been able to achieve. Right. I mean, you're essentially saying that these other countries capitulated to the United States and we are not capitulating? Yeah. But what would you call these other, these things that we've given up, like the digital services tax removing retaliatory tariffs? I think people would argue that we have been capitulating in some way and then it hasn't gotten us any movement. So I would say one of the reasons why the talks are not ongoing now is because Canada has not been willing to reach into a concession bag and give the U.S. anything else

with the digital services tax, that was done to try to get the talks back on track. But here's the fundamental problem, Jamie, is that Donald Trump, particularly on the front of trade, does not view countries as friends or allies, and that, you know, long history or integration or partnerships, none of that matters. Countries are merely counterparties. It's not good. It's not bad, but they are counterparties where you are up against them, somebody wins, somebody loses, and your goal is to completely crush the other side and to get them to make all the concessions when you make nothing. And so all of the instruments that Canada has been able to turn to in the past of governors who could talk sense to the Washington of members of Congress,

we've seen a full abdication on trading policy from the U.S. Congress. despite Article 1 saying it's their job to deal with trade policy. And so Donald Trump is the one person who has to be convinced here, and his style of negotiation is simply but zero sum and to try to make sure that the counterparty loses, well, he wins. And so this is nothing like we've seen in the past. And so the government has had to figure out how to navigate some, for whom there are no limits about tactics, there are no limits about, or constraints about other areas. And Canada, by not agreeing to a bad deal, has done itself a huge favor. And with the Kuzma or USMCA renegotiation imminent, there are hearings this week in Washington

about what ought to be in the U.S. position. Canada is not in a bad position playing the long game. It does need to get an agreement as soon as is reasonably possible, but the absolute worst thing it could do would be to take a European-style deal where you're essentially embedding a massive disincentive to investment in Canada and to companies investing and creating jobs in Canada. And I think we'll see in the coming months a movement toward finding a different way forward. You mentioned these Kuzma hearings. Are you concerned that he could potentially pull out accuser that Trump could as a bargaining tactic or at least threaten it? Sure. Which was obviously be absolutely devastating, right? How likely do you think that is?

So, you know what? You know what I said about no limits, no constraints? about the past or what anyone else thinks. Yeah, that would absolutely be something that he could decide to do, that he says, unless you do this, the agreement will go away. Some have also said that maybe what happens is on July 1st, the agreement doesn't get renewed because just for your background. What's supposed to happen is by July 1st, 2026, the countries need to decide whether or not they will extend the agreement as written for another 16 years or whether they will make changes to the agreement. And so this is becoming the deadline for the renegotiation.

If there is no extension, then what happens is the process goes into annual reviews for the next 10 years. So maybe he doesn't threaten to pull out of the agreement. Maybe he just doesn't extend and say, oh, I'm going to extract some concessions on lumber this year. I'm going to extract some concessions on dairy next year, and that becomes part of the strategy. And so I absolutely think we should expect the worst. And Canada will need to have a response that is effective and strong because Donald Trump can do anything and is unconstrained by anything. And so Canada needs to to plan for the worst on that. And it will see a very painful adjustment, but an adjustment is indeed already underway. Okay. I think that's probably a good place for us to end here today.

Eric, as always, thank you. You're very welcome. All right, that's all for today. I'm Jamie Poisson. Thanks so much for listening. Talk to you all tomorrow.