The United States has warned of a 50% tariff on some Canadian goods, citing Section 338 of the Tariff Act enacted in 1930. It cited Canada's discriminatory treatment of US-made automobiles, liquor, and dairy products as the grounds. This is the first time the US has invoked Section 338 to impose tariffs, and it appears likely to reignite trade disputes between the US and Canada, along with legal controversy going forward.
According to the White House on the 20th, President Trump signed a proclamation containing these measures. In a statement, US Trade Representative (USTR) Jamieson Greer said, "The United States continues to work to conclude fair and reciprocal trade agreements with its trading partners, but Canada, unlike other partners and allies, continues to take retaliatory measures against the United States."
The White House cited Canada's tariffs and quota system on US-made automobiles as the background for the tariff imposition. It also mentioned protectionist measures in the dairy sector and the history of some Canadian provinces halting sales of US-made liquor.
The tariff rate is 50%, taking effect on August 19, 30 days later. The products subject to the tariff include wine, hockey sticks, cement, dairy products, plywood, paper, and furniture. It does not apply to products such as steel and automobiles that are already subject to tariffs under Section 232 of the Trade Expansion Act. Items covered by the United States-Mexico-Canada Agreement (USMCA) will be subject to the 50% tariff without exception. According to CNN, the US government estimated that approximately $20 billion worth of Canadian goods will be affected.
Notable is the fact that the US invoked Section 338 of the 1930 Tariff Act. This is a law that allows the president to impose tariffs of up to 50% on countries engaged in discriminatory acts against US commerce. Unlike Section 122 of the Trade Act, which has a 150-day validity period, it has no expiration date. If tariffs are imposed based on this provision, it would be the first time since the law's enactment. In 1935, then-President Franklin Roosevelt found discriminatory treatment of US-made products by Germany and Australia, but did not use Section 338 to impose tariffs.
Ryan Majerus, an international trade lawyer at King & Spalding, told the New York Times (NYT) that "using this law is completely untested and will be challenged in court," saying the Trump administration may have imposed the tariffs to secure greater bargaining power in the USMCA renegotiation.
Peter Harrell, a visiting fellow at Georgetown University's Institute of International Economic Law, said on X (formerly Twitter), "If the tariffs actually take effect, they will raise interesting legal issues," pointing out that "various arguments could be raised about whether Section 338 requires a US International Trade Commission (USITC) investigation before a presidential decision, whether it has been implicitly repealed by subsequent legislation, and what the discrimination requirement actually means."
Earlier, President Trump had also threatened to raise tariffs on Canadian goods in retaliation for wildfire smoke that blanketed New York, Washington DC, and other areas last week. However, a senior US government official told Bloomberg that "this measure is unrelated to the wildfires."
