Key Takeaways
• The Trump administration has announced new 50% tariffs on select Canadian imports, including dairy, alcohol, holiday décor, plastic products and hockey equipment, with the levies scheduled to take effect Aug. 19 following a 30-day negotiation period.
• The tariffs, issued under Section 338 of the Tariff Act of 1930, apply even to goods previously covered by the USMCA and are intended to strengthen the U.S. position as the two countries renegotiate their trade relationship.
• Analysts say invoking Section 338 could pave the way for similar tariffs on other countries, increasing uncertainty for global trade, while businesses continue adapting to the evolving U.S. tariff framework following recent court rulings.
There’s another round of tariffs underway.
On July 20, U.S. President Donald Trump signed three proclamations to implement new 50% levies on Canadian goods in 30 days, in response to what the administration says are ongoing trade inequities in the U.S. auto, alcohol and dairy markets.
The tariffs are set to target several Canadian products on Aug. 19, including dairy, wine and whiskey, as well as cement, candles, Christmas decorations, plastic cups, ice hockey gear and down jackets. Energy, potash, fish and critical minerals are among the excluded categories.
A White House Fact Sheet states that President Trump’s latest salvo is pursuant to Section 338 of the Tariff Act of 1930, and that the tariffs apply even to products previously protected under the USMCA, which the Trump administration announced earlier this month it would not renew.
“Section 338 empowers the President to impose tariffs when a country disadvantages U.S. exporters relative to the exports of another country to offset the disadvantage or burden on U.S. commerce,” states the fact sheet. For example, “Canada established tariff-rate quotas on U.S. cheese that are much more restrictive than the tariff-rate quotas imposed on similar imports of cheese into Canada from the EU, despite Canada having trade agreements with both the U.S. and the EU.” Canada has imposed similar practices on U.S. autos, according to the statement.
The administration is also reportedly looking to defend spirits companies amid ongoing provincial bans on U.S. alcohol – currently in place in every Canadian province except Alberta and Saskatchewan.
The 30-day grace period allows for trade negotiations between the U.S. and Canada.
“Canada believes in the benefits of free and fair trade, as evidenced by our new government signing more than 20 new economic and security partnerships,” said Canadian Prime Minister Mark Carney in a statement. “This trade dispute has raised costs for families, particularly in the U.S. Canada stands ready to engage intensively to address outstanding issues with the U.S. to the mutual benefit of our citizens.”
The timing of the new round of tariffs is intentional, as the Trump administration looks to make major changes to the USMCA and gain the upper hand in negotiations.
Section 338 could also be used to justify tariffs on other countries’ imports, which could lead to “massive uncertainty,” said Scott Lincicome, vice president of general economics at the Cato Institute, as reported by the Associated Press.
“We crossed the Rubicon,” Lincicome said. “The invocation of 338 is the nuclear option for Trump tariffs.”
In February, the U.S. Supreme Court ruled that tariffs implemented under the International Emergency Economic Powers Act were unconstitutional, forcing the Trump administration to find alternative routes to implement the levies – like the Tariff Act of 1930. U.S. Customs and Border Protection also launched the Consolidated Administration and Processing of Entries portal in recent months to allow importers of record to apply for refunds after the Supreme Court ruling.
