U.S. President Donald Trump has postponed threatened 50 per cent tariffs on a range of Canadian goods for three days as Ottawa and Washington negotiate a deal, while unexpectedly raising the prospect of reviving the cancelled Keystone XL oil pipeline.
The tariffs, imposed under Section 338 of the U.S. Tariff Act of 1930, were scheduled to take effect Wednesday. A White House proclamation moved the effective date to Aug. 22, saying Canada had expressed a commitment to address U.S. complaints involving alcohol, dairy products and motor vehicles.
Prime Minister Mark Carney said Tuesday that the countries had made “substantial progress,” although “important work still” remained.
The reprieve leaves Canada negotiating under the threat of tariffs whose legal foundation remains highly uncertain.
Jennifer Hillman, a Georgetown University law professor, former member of the World Trade Organization’s Appellate Body and one of the senior U.S. legal scholars challenging Trump’s tariff authority, told Energi Media that Section 338 has never previously been used to impose tariffs and has effectively lain dormant since the creation of the post-war global trading system.
“My own answer to that is no,” Hillman said when asked whether Congress had delegated this authority to the president. She noted that the U.S. Supreme Court had already rejected Trump’s previous attempt to claim broad tariff powers under the International Emergency Economic Powers Act.
Hillman said the new tariffs are vulnerable on several grounds, including that Section 338 requires tariffs to offset specific discrimination against U.S. goods.
“What the Trump administration is doing and potentially putting 50% tariffs on $20 billion worth of Canadian goods is way over retaliating,” she said.
Her analysis raises a difficult question for Ottawa: why make major concessions during the three-day negotiating window in exchange for removing tariffs that may ultimately fail in U.S. courts?
Andrew Coyne, a Globe and Mail columnist, argues that Canada faces an even more fundamental problem. Concessions are unlikely to produce a stable agreement because Trump responds to concessions by demanding more.
“If when you make concessions to people with aggressive intent, nine times out of ten, the concession doesn’t slake their thirst … it just encourages them to make more demands,” Coyne told Energi Media. “It signals to them that demands and threats and coercion work.”
Coyne said Trump’s unpredictability makes tailoring Canadian policy to secure his approval particularly dangerous.
“If you lose no matter what you do, then you might as well do what you want to do,” he said. “You might as well do the thing that you think is the best thing for the country, and not worry too much about what his response is going to be.”
Trump introduced another major issue Tuesday, saying on social media that the two countries “have a DEAL” subject to final documents and adding that Keystone XL “may be awoken from the grave.”
Carney’s statement made no mention of Keystone XL.
The cancelled pipeline was designed to move 830,000 b/d of Alberta crude to Steele City, Nebraska, connecting Canadian production with U.S. Gulf Coast refineries.
There is no public evidence so far that Canada has agreed to revive Keystone XL, that Washington has formally requested it as part of the negotiations, or that Canadian producers could supply the additional crude.
Ottawa and Alberta are already advancing a proposed 1 million b/d West Coast pipeline, while Trans Mountain is considering expansions that could add roughly 300,000 b/d. Together with Keystone XL, the projects would represent more than 2 million b/d of potential additional pipeline capacity.
That leaves a basic question unanswered: where would the oil come from?
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