Trump imposes 50% tariffs on most Canadian goods

The Trump administration is imposing a 50% tariff on roughly $20 billion of Canadian goods, effective August 19, escalating a trade dispute. Citing Canadian discrimination against U.S. products, the White House invoked the never-before-used Section 338 of the 1930 Smoot-Hawley Act. In response, Canada canceled a joint celebration for the new Gordie Howe bridge, though leaders from both countries have agreed to intensify negotiations.

Trump's Section 338 tariffs

• ▪Affected goods include wine, hockey sticks, cement, electronics, and various cocktail ingredients like gin, whisky, and bitters
• ▪The White House stated the tariffs are a response to Canada's "discriminatory treatment" of U.S. cars, alcohol, and dairy products
• ▪The Trump administration will impose 50% tariffs on a range of Canadian goods, scheduled to take effect on August 19
• ▪Goods traded under the U.S.-Mexico-Canada Agreement (USMCA) will not be exempt from the new tariffs
• ▪President Trump confirmed the new tariffs are not a response to recent Canadian wildfire smoke that affected the U.S.
• ▪The tariffs will apply to approximately $20 billion worth of Canadian imports, or about 5.2% of goods imported from Canada in 2025

Smoot-Hawley historical context

• ▪Section 338 grants the president authority to impose duties of up to 50% on goods from a country found to be discriminating against U.S. commerce
• ▪The tariffs were imposed using Section 338 of the 1930 Tariff Act, also known as the Smoot-Hawley Tariff Act
• ▪Section 338 of the Smoot-Hawley Act has never been used to impose tariffs before this instance
• ▪The Smoot-Hawley Act is historically blamed by economists for worsening the Great Depression by triggering a global trade war

Legal challenges to tariff authority

• ▪Some trade lawyers have stated that the use of Section 338 for these tariffs could be vulnerable to legal challenges
• ▪A potential legal argument against the tariffs is that Section 338 was intended to counter unilateral discrimination, not to punish a country for retaliating against U.S. tariffs
• ▪Earlier in the year, the U.S. Supreme Court struck down President Trump's use of the International Emergency Economic Powers Act (IEEPA) to impose tariffs

Presidential tariff legislation options

• ▪President Trump has previously used other legal provisions to levy tariffs, including Section 232 of the Trade Expansion Act of 1962 and Section 301 of the Trade Act of 1974
• ▪Unlike other tariff authorities, Section 338 of the Smoot-Hawley Act does not explicitly require investigations or consultations before tariffs are announced

Canada-US trade relationship

• ▪Several Canadian provinces, including Ontario, have been boycotting U.S. alcoholic beverages in retaliation for previous American tariffs
• ▪Due to the provincial boycotts, American wine exports to Canada have fallen by more than US$357 million
• ▪The Distilled Spirits Council of the United States said the 50% tariff "deepens trade tensions and raises the risk of further retaliation."
• ▪Canadian Prime Minister Mark Carney and President Trump agreed to "intensify negotiations" in the weeks before the tariffs take effect
• ▪Canada canceled a planned joint celebration with the U.S. to mark the opening of the Gordie Howe International Bridge