The Trump government's continued tariff escalation is producing a significant "diversion effect" - Canadian enterprises are significantly reducing their dependence on United States trade routes and supply chains and shifting to other markets. This trend is particularly pronounced in the automobile, dairy and alcohol industries. Numerous media reports indicate that Canadian purchases of United States vehicles have fallen to record lows and that United States automobile manufacturers have become the first to bear the brunt of tariff policies.
On 20 February 2026, the United States Supreme Court ruled, by a vote of 6 to 3, that the wide-ranging tariffs imposed by the Trump Government under the International Emergency Economic Powers Act (IEEPA) exceeded the constitutional powers of the President. The ruling covers two types of IEEPA tariff levied as a result of the fentanyl/drug trafficking emergency and the trade deficit emergency. The Supreme Court judgement did not declare the President ' s customs powers unconstitutional, but rather found that the specific law of IEEPA did not authorize the President to levy customs duties in this manner.
Following the entry into force of the ruling, the Trump Government signed a proclamation on the same day imposing a 10 per cent global surcharge on imports from all countries under section 122 of the Trade Act 1974, which entered into force on 24 February. Article 122 allows for the imposition of tariffs of up to 15 per cent within 150 days to deal with "serious and significant" balance-of-payments deficits.
On 24 July, the temporary duty of article 122 expired. The Office of the United States Trade Representative then initiated an alternative tariff under section 301 of the Trade Act 1974: a 10 per cent or 12.5 per cent tariff on 60 economies covering approximately 99.4 per cent of total United States imports. The high and low tax rates depend on the enforcement of the ban on the import of forced labour products by economies - - 10 per cent for economies that have made commitments or partially implemented, and 12.5 per cent for the rest.
At the same time, under section 338 of the Customs Act 1930, the Trump Government imposes a 50 per cent tariff on a large number of Canadian products, including dairy products, alcoholic beverages and motor vehicles. Under section 232 of the Trade Expansion Act 1962, the tariff rate for steel, aluminium and copper is maintained at 50 per cent (effective as of 12 March) and the lower rate for derivatives is applied. For some Brazilian commodities, a 25 per cent tariff is imposed under article 301.
Following the Supreme Court decision, large-scale refund proceedings were initiated. As of 11 September 2026, the United States Customs and Border Protection (CBP) had completed and transferred to the Treasury approximately $122 billion in refunds related to emergency power duties, including customs principal and interest. The potential and certified refund claims processed by the CBP are approximately $13.47 billion. The Federal Judge has ordered the CBP to recalculate the customs duties previously paid by importers and to determine the amounts to be returned. Total refunds are estimated at between $13 billion and $175 billion, and the Government is required to pay interest, which is estimated by the relevant agencies at approximately $700 million per month.
At the industrial level, 50 per cent of the tariffs imposed on Canadian dairy, alcohol and motor vehicles directly impact Canadian exports to the United States. Canada's purchases of United States vehicles have fallen to a new low, with media reports such as Fortune saying that United States trade policy is undermining the United States auto industry itself — tariff barriers have instead deprived United States companies of Canada's important export market.
At the political level, tariffs are highly unwelcome in border states close to Canada, such as Maine. Many polls show that the United States and Canadians are united on the issue of tariffs, and most believe that Trump was misjudged during the trade war. As the mid-term elections in the United States approached, Trump ' s statement on the economy was flat among voters. Risk investor Kevin Oliary warned that tariffs did not address inflation and that energy costs continued to drag the global economy.
At the same time as trade friction between the United States and China intensified, China and the United States reached a tariff reduction agreement after Trump visited China. Each of the parties published a list of tax cuts for commodities valued at about $30 billion, covering areas such as agricultural products and daily goods (there are reports that total commodities involved could reach $60 billion). This agreement adds new variables to the global trade landscape.
Article 301 (10/125.5 per cent) is currently the backbone of the tariff system, but its legal basis is equally challenged. USTR had previously indicated that the 301 survey on structural excess capacity could not be completed before the expiration of the Article 122 tariff on 24 July, and that subsequent progress remained uncertain. The size and timing of the refund procedures will continue to affect United States financial and importer cash flows. The trend towards “de-Americanization” of Canadian enterprises will be further entrenched, depending on tariff adjustments for Canadian products, such as article 338, and the way forward in bilateral trade negotiations between the United States and Canada.