On July 20, 2026, President Trump signed three proclamations imposing an additional 50% ad valorem duty on certain Canadian imports under Section 338 of the Tariff Act of 1930 (19 U.S.C. § 1338). The proclamations target motor vehicles, alcoholic beverages, and dairy products, and are scheduled to take effect on August 19, 2026. Although Section 338 has remained on the books for nearly a century, it appears never before to have been used to impose tariffs.
This move marks another shift in the administration’s tariff strategy following the Supreme Court’s February 2026 decision invalidating the use of the International Emergency Economic Powers Act (IEEPA) to impose tariffs.
Section 338 is a provision of the Smoot-Hawley Tariff Act of 1930. It authorizes the president, upon finding that a foreign country either (i) imposes an “unreasonable charge, exaction, regulation, or limitation” on U.S. products not equally enforced on like articles of every foreign country or (ii) “discriminates in fact” against U.S. commerce so as to disadvantage it relative to any other country, to impose additional duties of up to 50% ad valorem.
If the discrimination persists, the president may escalate to the exclusion of products from that country. The statute requires the duties to take effect no earlier than 30 days after the proclamation.
Unlike Section 301 or Section 232, Section 338 does not expressly require an agency administrative process before the imposition of tariffs. Rather, it appears to authorize the president to act directly upon finding that a foreign country has discriminated against U.S. commerce. Although the speed and flexibility of Section 338 may make it an attractive authority for the administration following the invalidation of IEEPA, the absence of judicial or administrative precedent under Section 338 creates substantial litigation risk.
The three proclamations each target a different category of Canadian goods, and each rests on a separate finding that Canada is discriminating against American commerce. All three proclamations impose a 50% additional ad valorem duty, all taking effect on the same date and subject to the same exceptions.
Annex II to each proclamation implements changes to the Harmonized Tariff Schedule and covers a broader set of Canadian goods beyond cars, alcohol, and dairy, including cement, furniture, fishing rods, seeds, clothing, and hockey equipment.
Section 338 does not appear to have been used to impose tariffs, and its invocation has been infrequent. In the 1930s, the provision served as a source of diplomatic leverage in negotiations involving France and Spain. Then, in 1935, the president identified what he characterized as discrimination by Germany and Australia against U.S. commerce, but rather than imposing duties under Section 338, he opted to withdraw certain trade benefits under separate authority. No court appears to have interpreted the provision. Since then, Section 338 largely fell into disuse as U.S. trade policy gravitated toward the Trade Act of 1974 and the World Trade Organization (WTO) framework.
Two unusual features of Section 338 are notable in this context:
Section 338 offers features that other tariff authorities do not combine in a single statute.
Section 338, by contrast, allows the president to impose duties of up to 50% after a unilateral finding of discrimination, with as little as 30 days before implementation.
That combination of speed, permanence, and a comparatively high tariff ceiling may explain the administration's interest in reviving the statute. It also means that companies may receive far less advance warning than they would in a traditional Section 301 or Section 232 proceeding. The trade-off is that Section 338 has none of the legal track record that makes Sections 232 and 301 defensible in court, which is the core litigation risk.
On July 1, the U.S. Trade Representative formally confirmed that the United States would “not agree to renew the USMCA in its current form,” setting in motion a lengthy period of negotiations while the agreement remains in force.
The use of Section 338 in this context may ultimately become a point of leverage—and perhaps also friction—as the administration continues its efforts to renegotiate the USMCA. Notably, each proclamation relies extensively on Canada’s alleged failure to afford the United States the treatment contemplated under the USMCA to support the president’s finding of “discrimination” under Section 338.
If the administration continues to pursue modifications to—or even withdrawal from—the USMCA, Section 338 could provide an alternative mechanism for exerting negotiating leverage on the basis of Canada’s alleged departures from the USMCA that do not require relying on the USMCA’s state-to-state dispute settlement procedures.
Summer associate Christina I. Hill in the Washington, D.C. office contributed to the writing of this article.