Facing a potential $40M US tariff bill, this American importer is suing Trump to end some tariffs on Canada

Inside a sprawling refrigerated warehouse, tucked into an industrial neighbourhood not far from New Jersey's Newark Airport, you'll find a new front in the U.S.-Canada trade war.

It's the headquarters of Gellert Global Group, a third-generation, family-owned food distribution company that is suing the Trump administration over its 50 per cent tariffs on certain Canadian goods and seeking refunds.

In one of his first broadcast interviews since launching the lawsuit, Thomas Gellert, the company's CEO, says he felt he had to do something.

"We can't sustain a tariff like this on these products for much longer," he said during an interview with CBC News on the floor of the warehouse in Elizabeth, N.J.

Gellert Global Group imports roughly $80 million US worth of Canadian cheeses every year, including Celebrity goat cheese produced by Mariposa Dairy in Lindsay, Ont. It also imports a range of Canadian-produced brie and camembert products. That means the business could be paying $40 million US in tariffs for the year.

"Customers are not going to take price increases. Everyone is sort of beat down and tired from inflationary pressures," Gellert said, confirming that his company is eating the cost of the tariffs for now.

Under Section 338 of the U.S. Tariff Act, U.S. President Donald Trump, seen speaking to reporters in Maryland Thursday, has the right to impose tariffs on countries that have discriminated against the U.S. (Alex Brandon/The Associated Press)

Gellert tried to get exemptions for these products in meetings with American lawmakers and diplomats, including U.S. Ambassador to Canada Pete Hoekstra. In those conversations, he says he highlighted the fact that American-produced milk is being used for some of the cheese products hit by tariffs, arguing that, in the end, the policy is hurting U.S. farmers too.

Those lobbying efforts were not successful. And with no Canada-U.S. trade deal appearing to be on the horizon, Gellert decided he had to take legal action.

"Frankly we don't have time to wait for things to settle on their own," he said.

"We have a business here to run."

The lawsuit was filed by the Liberty Justice Center, a non-profit, non-partisan legal advocacy organization. It is the same organization that successfully challenged Trump's IEEPA tariffs, which were struck down by the U.S. Supreme Court earlier this year.

"We felt like our job wasn't done if the President keeps putting illegal tariffs on different countries," said Sarah Albrecht, the chair and CEO of the Liberty Justice Center.

Tariff technicalities

The Trump administration imposed this round of tariffs after trade talks with Canada broke down in August.

The duties are applied through Section 338 of the U.S. Tariff Act, also known as the Smoot-Hawley Act, a Depression-era law that had never been used before for tariff purposes.

The law gives the president the power to impose tariffs of up to 50 per cent on imported goods from a country that has discriminated against the U.S.

The Trump administration has argued that Canada's decision to retaliate against previous rounds of U.S. tariffs amounts to discrimination. It specifically cited the banning of American alcohol products by certain provinces, protections for the Canadian dairy industry and measures related to the auto sector.

In a statement released the day the lawsuit was filed, the Liberty Justice Center said Section 338 cannot be used as an "all-purpose authorization for the executive branch to impose sweeping tariffs or import restrictions whenever a trade dispute arises."

Among the arguments the group is making, it says there's a disconnect between allegations of discrimination by Canada and the products Trump is targeting with the tariffs. It also says the Trump administration illegally rushed the implementation of some of the tariffs. And it claims Trump does not have the authority to impose tariffs in this way.

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"No president should have the power to pull a dormant statute off the shelf and use it to impose sweeping tariffs or import bans without the limits Congress required," Albrecht said.

Initially, the tariffs applied to roughly $28 billion worth of Canadian goods, with targets including cement, road salt, hockey sticks and other items. However, the list has been adjusted twice to remove some products and add others.

Some of the changes were made at the request of Republican Sen. Susan Collins of Maine, as she finds herself in a tough re-election race. She has sought exemptions for products important to businesses in her home state, as the trade war with Canada is proving unpopular there.

WATCH | Trump shifts tariffs on Canadian goods as he hints at trade deal; Carney remains cautious:

Trump to lift some tariffs on Canada before U.S. midterms

October 23|

Duration

2:41

Experts mixed on strength of Trump's tariff justification

Since the tariffs were first announced, legal experts have offered varying opinions on whether the measures would survive a legal challenge.

"There's a good chance it could get reversed," said Ryan Majerus, a trade lawyer and partner at King & Spalding International Trade Group.

"I think the administration may have a tough time identifying the reasons why these particular products or these particular actions by Canada are discriminatory."

Lawyers for the Trump administration will have to make the connection, Majerus says, between the alleged discrimination and why the U.S. tariffs offset that discrimination.

"The fact that there have been adjustments [to the product list] since they've been put in place ... I think it may undermine their claim as well," he said.

However, the Trump administration is expected to put up an intense defence.

"I think they can make some creative arguments on how they're able to kind of invoke the authority broadly," Majerus said.

"It's a bit of a blank canvas in terms of how the courts are going to look at this."

A display of Celebrity goat cheese and other Canadian cheese products. Gellert Global Group says U.S. tariffs on Canadian goods are threatening its business and the Canadian producers it works with. (Katie Simpson/CBC)

Fears of losing shelf space

If there isn't a resolution by next year, Gellert says his company will have to reassess how it handles the tariffs and whether it is sustainable to keep importing these Canadian goods.

"If we stop selling a product — to get back on the shelf would be very difficult," he said.

"We don't want to lose shelf space."

He also says that if these Canadian products are not available to U.S. consumers, there aren't readily available American alternatives to replace them.

"There is not enough goat milk in the United States to support demand," he said.

"And the existing goat cheese factories that are here, even if they're importing frozen curd, they don't have the capacity. So that's the reason why we work with our Canadian partners."

The goat cheese issue specifically weighs heavily on Gellert. He says he worked closely with the family that owns Mariposa Dairy and encouraged them to invest in production to grow their business.

"I do feel some sort of sense of personal responsibility to that community, that we've encouraged them to build up infrastructure to help support the business — and now that's at risk," he said.

"If we stop buying, they start culling goats. It's not something that can be brought back again."