Two fronts of tariff risk: Congressional scrutiny and the pending U.S. Supreme Court IEEPA decision

Canadian companies trading with U.S. parties or relying on United States-linked supply chains continue to operate in an environment where tariff risk can change quickly and where the legal footing for certain tariffs remains under active scrutiny. Two parallel dynamics are now colliding in the United States:

• Congressional pressure to unwind the emergency basis for certain Canadian-related tariffs
• The anticipated US Supreme Court decision on whether the International Emergency Economic Powers Act (IEPPA) actually authorizes U.S. President Donald Trump to impose tariffs through executive order

The congressional track: A House vote to terminate the emergency basis for tariffs

The U.S. House of Representatives recently passed a resolution (219–211) that seeks to terminate the national emergency invoked to apply tariffs to certain Canadian goods. The emergency declaration, framed as an attempt to control cross-border fentanyl trafficking, has been described as the underpinning for tariffs on a range of Canadian goods that do not qualify for exemption under the Canada-US-Mexico Agreement (CUSMA).

From a legal mechanics perspective, the important point is that Congress can review a Presidential emergency declaration but a resolution of disapproval – unless passed by a 2/3rds majority – can still be met with a presidential veto. In this case, the vote passed with a simple majority but didn’t reach the 2/3rds majority needed to avoid a Presidential veto. While the House vote against President Trump’s tariffs is a meaningful political signal especially where a number of house Republicans also supported the motion, it is not an immediate end to the tariffs on certain Canadian goods.

Next, the motion will proceed to a Senate vote after which, if approved, it will then go to the President for approval or veto.

The judicial track: Awaiting the U.S. Supreme Court’s decision on IEPPA tariffs

The U.S. Supreme Court is currently considering whether certain tariffs imposed by President Trump’s executive order are within the authority delegated to the President under IEPPA. The issue is before the Court in Learning Resources, Inc. v. Trump, which was consolidated with Trump v. V.O.S Selections. A key theme of this case is whether a tariff functions as a tax, which is traditionally a core domain of Congress, or as a mechanism to regulate importation. We look forward to updating readers on the decision by the U.S. Supreme Court once the decision is released.

While awaiting the U.S. Supreme Court’s decision, Canadian organizations with U.S. exposure can reduce uncertainty by:

• Mapping exposure – Identify which products are subject to higher tariffs and which qualify for CUSMA treatment today
• Review contractual agreements – Confirm whether tariff allocation, change-in-law provisions and purchase order terms align with the intended risk allocation
• Coordinate internally – Ensure legal, finance and operational teams are aligned on pricing actions and customer and supplier communications if the legal landscape shifts quickly

The combination of congressional scrutiny of the emergency basis for tariffs and the imminent U.S. Supreme Court decision on the IEPPA-based tariffs authority creates uncertainty for Canadian businesses. For now, a practical approach is to treat tariffs as a contractual risk issue, which should include allocating responsibility clearly, planning for volatility and moving quickly when the US Supreme Court clarifies the legality of the tariffs.

For assistance on how your organization should navigate these turbulent times, the leading commercial team at MLT Aikins will happily assist you in charting the best path forward.

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