Tariffs threaten to add up to USD $50 million to New York State’s annual procurement costs for construction services, a new multi-state legal challenge maintains. The recent filing in the United States Court of International Trade, on behalf of 12 state governments, also raises the spectre of Ontario and/or Quebec imposing retaliatory restrictions on electricity exports and warns: “this would be catastrophic”.
Attorneys General from the 12 states — Arizona, Colorado, Connecticut, Delaware, Illinois, Maine, Minnesota, Nevada, New Mexico, New York, Oregon and Vermont — are arguing that the U.S. President’s use of the International Emergency Economics Power Act (IEEPA) to impose tariffs is not in accordance with the Act’s intent and is an unconstitutional exercise. Their complaint, filed April 23, contends that he has wrongly assumed authority to impose taxes that only Congress possesses, and that his justifications for doing so do not meet the IEEPA’s standard for “unusual and extraordinary threats” primarily originating from outside the U.S..
“In the nearly five decades since IEEPA was enacted, no other President has imposed tariffs based on the existence of any national emergency, despite global anti-narcotics campaigns spearheaded by the United States and longstanding trade deficits,” states the legal application that Oregon Attorney General Dan Rayfield submitted on behalf of his state and those of his 11 peers. “The novelty of citing IEEPA for the carte blanche tariff authority the President has exercised is itself good reason to treat these Orders with suspicion.”
The Attorneys General note that the executive orders outlining the premise for tariffs on Canadian and Mexican imports do not include a rationale for the tariff rates or explain how the subject goods are relevant to the U.S. fentanyl crisis that Canada and Mexico purportedly propagate. The justification for the reciprocal tariffs imposed on most other trading nations except Canada and Mexico is also questioned since the executive order describes the trade deficits triggering the emergency as “persistent”— inherently meaning that they are not unusual and extraordinary.
The Attorneys General reject the U.S. government’s supposition that trade deficits arise from other trading nations’ efforts to “suppress wages and consumption” thereby “artificially increasing the competitiveness of their goods in the global market”. Conversely, they suggest trade deficits are reflective of U.S. importers’ and consumers’ superior purchasing power relative to their global counterparts.
The U.S.-based real estate economist, Mark Dotzour, made a similar observation during a recent online presentation to the Society of Industrial and Office Realtors (SIOR) Canada. However, he did not couch it as reason for concern, but, rather, underscored that about 70 per cent of U.S. economic activity is tied to consumer spending.
“When you give them money, nobody can outspend an American consumer. That’s our national, global competitive advantage,” Dotzour asserted.
Projecting financial harms
The court filing also claims tariffs cause “direct financial harm” to the plaintiffs, which have a mandate to provide services that require the purchase of a wide range of materials, equipment, products and parts. This includes both state departments and publicly funded entities like state universities. Typically, they procure from a mix of foreign suppliers and domestic manufacturers that may rely on imported materials and components in their production.
Notably, Delaware’s Office of Fleet Services, which provides vehicles for various state agencies, typically purchases an average of 70 mini-vans from Stellantis per year, which are manufactured in Windsor, Ontario. Meanwhile, the New York Office of General Services (NYOGS) forecasts “significant impacts”, particularly due to tariffs on Canadian, Mexican and Chinese imports. This is expected to push up material costs, escalate bid prices, disrupt supply chains and perhaps decrease the number of capital projects the state can undertake.
“NYOGS’s primary responsibilities include managing and leasing real property, designing and building facilities, and contracting for goods, services and technology for the State of New York,” the filing advises.
Canadian electricity is identified as a critically necessary commodity. In 2024, New York State imported 7.7 terawatt-hours (TWh) or 7.7 million megawatt-hours (MWh) valued at hundreds of millions of U.S. dollars via system interties with the Independent Electricity System Operator (IESO) of Ontario and Hydro Quebec.
“NYOGS estimates that if Ontario or Quebec restricted electricity exports to New York, prices would soar at a time when the State is facing capacity restraints and is relying more heavily on Canadian hydropower than ever,” the court filing projects. “New York cannot simply buy less electricity or buy electricity from other sources.”
Similarly, Oregon’s largest natural gas utility, NW Natural, imports about 60 per cent of its supply from Canada, and it has made a regulatory filing to allow it to argue that tariffs should be recovered in rates. If that occurred, the state would see added costs directly from the purchase of natural gas to heat its building portfolio, and also indirectly if higher natural gas rates are then passed through to electricity generated at gas-fired facilities.
Looking at construction and procurement, NYOGS’s 2024 construction budget was about USD $1 billion, estimated to be roughly evenly split between labour and materials. Estimating the impact of tariffs on a similar amount of bids this year, it predicts added costs of USD $40 to $50 million if tariffs were to apply on 37 per cent of purchased construction materials.
As well, the legal filing reports that material suppliers and subcontractors have become more reluctant to commit to prices for the long-term due to tariff-related volatility, making it more challenging to extend contracts or obtain competitive bids.
“In NYOGS’s experience, these price increases rarely fully recover to pre-event levels. Consequently, the tariffs will likely have a long-term negative effect on project costs and, consequently, agency capital programs,” it states.
