Insights

On July 20, 2026, President Trump announced additional tariffs on certain Canadian imports under Section 338 of the Tariff Act of 1930, citing concerns that Canadian trade measures disadvantage U.S. exporters. The tariffs are scheduled to take effect 30 days after issuance, on August 19, and will apply even where goods otherwise qualify for preferential treatment under the United States-Mexico-Canada Agreement (USMCA).¹

Trump signed three proclamations in order to impose an additional 50% tariff on certain Canadian goods, including products in the automotive, alcoholic beverage, and dairy sectors. The threatened tariffs also include items such as wine, hockey sticks, and cement. Moreover, certain categories of goods, including energy products, potash, critical minerals, fish, and products already subject to Section 232 measures, are excluded.²

The Section 338 tariff action comes amid broader uncertainty surrounding the future of U.S.-Canada trade relations and ongoing discussions regarding the United States-Mexico-Canada Agreement (USMCA). The Trump Administration has expressed concerns that the current agreement does not sufficiently benefit U.S. workers, businesses, and exporters and has indicated that revisions may be necessary. As it currently stands, the Administration does not intend to renew the USMCA in its current form.

Section 338 Tariff Authority

The action to use Section 338 represents a notable development in U.S. trade policy; historically, Section 338 has been rarely used as a basis for imposing tariffs, and since the Supreme Court’s ruling on IEEPA tariffs, Trump has primarily turned to Section 232 authorities.

Moreover, Section 338 of the Tariff Act of 1930 is unique because it authorizes the President to respond with tariffs only when a foreign country imposes discriminatory or unreasonable restrictions that burden U.S. commerce. Unlike Section 232, which is focused on national security concerns, Section 338 provides authority to address trade practices that disadvantage U.S. exporters.³

To justify these new tariffs, the administration identified several Canadian policies as contributing to unequal treatment of U.S. goods in its official White House memo.

These include restrictions affecting U.S. automotive exports and aspects of Canada’s dairy quota system. The administration also cited declining U.S. exports in certain sectors as evidence of the impact of these measures, including reductions in U.S. automotive and alcoholic beverage exports to Canada. Moreover, an official statement from a senior white house official made on Monday, July 20, notes that Trump is acting in response to unequal and discriminatory treatment from Canada when they removed US alcohol from Canadian stores in April of 2025, alongside Canadian limits on auto imports and dairy products.

Importantly, it seems that the administration took careful steps to specifically name unequal treatment, providing statistics and dated information in order to justify Section 338 tariffs in the face of any potential constitutional challenge.

Future Compliance Considerations for Businesses

Interestingly, some doubt the implementation of these new tariffs. In reference to Trump’s 30-day implementation timeline, Ryan Majerus, former in the U.S. Trade Representative’s Office during the first Trump administration, noted: “The fact that it’s delayed 30 days makes me think it’s a negotiating tactic, it seems like leverage.”

Nevertheless, companies involved in U.S.-Canada trade should evaluate how these developments may affect their operations, including the following actions:

• Importers should review whether their products fall within the scope of the new Section 338 measures and whether any exclusions apply.

• Importers should also review the Accurate Harmonized Tariff Schedule (HTS) classification and product documentation to determine applicable duty treatment.

• Businesses should assess whether additional duties may affect sourcing decisions, pricing strategies, or supplier relationships.

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Companies should continue monitoring negotiations between the United States and Canada, as tariff implementation and the status of current USMCA negotiations may change significantly depending on the outcome of discussions.