Fifty percent tariffs on a range of imports from Canada are set to take effect on August 19. President Trump announced the tariffs, which would be levied under Section 338 of the Tariff Act of 1930, on July 20 as a means to address discrimination by Canada and its provinces against American exports of dairy products, alcoholic beverages, and motor vehicles. Though the announcement of these duties—given their limited scope and the foreign practices they are aimed at—appeared to amount to a negotiating tactic ahead of bilateral talks with Canada on extending the US-Mexico-Canada Agreement (USMCA), their forthcoming imposition carries significant risks for the future of US trade policy that extend beyond these specific duties. In a worst-case scenario, Section 338 could become the next presidential “tariff button,” wielded much as the International Emergency Economic Powers Act (IEEPA) was in 2025 and early 2026, before the Supreme Court’s decision invalidating its use to tax imports. Congress should quickly step in and repeal this outdated statute.
Section 338 authorizes the president to impose tariffs of up to 50 percent on imports from a country that: a) imposes “any unreasonable charge, exaction, regulation, or limitation” on a product from the United States that is not equally enforced on like products from every foreign country, or b) discriminates, through its laws, regulations, and/or practices against the commerce of the United States and, thereby, places it at a disadvantage vis-à-vis the commerce of any other foreign country. On the latter precondition, the statute’s definition of what may constitute a discriminatory practice is broad, citing “any customs, tonnage, or port duty, fee, charge, exaction, classification, regulation, condition, restriction, or prohibition” as instances thereof. As he has done with previous tariffs imposed through other statutes, President Trump is using the broad language in Section 338 to justify this next round of duties.
Indeed, the forthcoming tariff actions, though covering only about 5 percent of US imports from Canada, are indicative of the vast realm of foreign “measures” that could be actionable under the statute.
The action on Canada’s dairy policies, for instance, rests on a technical discrepancy between the market access granted to American cheese producers under the USMCA and that granted to their European counterparts under the EU-Canada Comprehensive Economic and Trade Agreement (CETA). Under both agreements, Canada limits the volume of cheese that can be imported duty-free every year through tariff-rate quotas (TRQs), and the “fill rate” under both TRQ regimes was similar in 2025. Yet, the Canadian government allows certain domestic firms (i.e., retailers) to import cheese duty-free under CETA but not under USMCA. President Trump has seized on these different TRQ regimes to threaten 50 percent “anti-discrimination” tariffs, even though a USMCA panel in 2023 ruled that Canada’s allocation of the dairy TRQs under this agreement was not illegal.
The actions on Canada’s measures affecting American alcohol and American automobiles may be even more problematic because these policies originated as retaliation for earlier, unjustified American tariffs on Canadian products. Most Canadian provinces banned the sale of American alcohol through government-managed distribution channels in response to Trump’s “emergency” tariffs due to fentanyl smuggling from Canada to the US. Meanwhile, the Canadian federal government imposed tariffs on certain American automobiles in response to US “national security” tariffs on Canadian automobiles. As other Cato scholars and I have previously written, the justifications for these tariffs were ludicrous. And while the legality of Canada’s retaliatory measures—particularly the provincial bans on American alcohol, given that the US fentanyl tariffs have already been invalidated by the Supreme Court—can be disputed, it does not change the fact that the Trump administration is weaponizing Section 338 in response to policies engendered by its own weaponization of other executive trade authorities.
Should the tariffs enter into effect—American and Canadian officials are, as of this writing, negotiating intensively ahead of the August 19 deadline—legal challenges will likely follow, which, in turn, will force courts to resolve some of the complicated legal questions raised by Section 338, such as:
Whether Section 338 remains valid, or whether it has been superseded by Section 301 of the Trade Act of 1974, another statute that similarly targets unfair trade practices by foreign countries;
Whether an affirmative finding by the International Trade Commission (ITC) that a foreign country is discriminating against US commerce is a necessary prerequisite before the president can take remedial action under the statute; and
Whether factual determinations made by the president under the statute—including a) the existence of a foreign discriminatory practice that places US commerce at a disadvantage and b) that the action taken in response addresses said burden or disadvantage and is in the public interest—are reviewable by courts or not.
Judicial decisions on these and other issues could invalidate Section 338 for good, or sanction it as a tool for imposing tariffs with limited procedural and substantive guardrails. Indeed, were courts to uphold Section 338 as valid authority and determine that presidential determinations under the statute do not require a prior determination by the ITC and are not reviewable by courts, the Trump administration would obtain a “tariff button” whose only tangible limitations are a 50 percent cap on duties levied through it and a minimum 30-day waiting period before they take effect.
As noted above, the Section 338 actions at issue today are limited in scope, but the risk is high that future uses of such a “tariff button” are more far-reaching. A pattern in President Trump’s use of executive tariff authorities throughout his terms in office is the gradual expansion of duties imposed through these statutes to cover more US imports. For instance, Trump’s first invocation of Section 232 in March 2018 to impose “national security” tariffs on imported steel and aluminum targeted less than 1 percent of total US imports based on 2017 levels (i.e., the preceding year). Today, the administration levies “national security” tariffs under this statute on a wide range of imports, from steel and aluminum derivatives to automobiles, trucks, semiconductors, and pharmaceuticals. Similarly, the Trump administration’s initial Section 301 tariff action on China in summer 2018 targeted $50 billion in imports from this country, about 2 percent of US imports in 2017. Today, Section 301 has become President Trump’s tariff statute of choice to rebuild his IEEPA tariff wall, with the Tax Foundation estimating that the replacement duties imposed through this statute cover about 28 percent of total US imports, based on 2025 levels. A similar expansion in the scope of Section 338 tariffs, therefore, should not be ruled out, especially because this statute contains even fewer procedural hurdles than both Sections 232 and 301, making it an enticing rapid-response tool for a president who is bent on using tariffs to gain leverage in international negotiations and to punish countries when he does not get what he wants.
Section 338’s apparent applicability to a broad range of foreign practices and lack of meaningful restraints on presidential authority, plus the likelihood that future invocations of this statute will cover a larger share of US trade, make it imperative for Congress to repeal it. Other laws address similar concerns (e.g., Section 301) and contain relatively more (albeit flawed) guardrails against presidential abuse of tariff authorities, so repealing Section 338 would not leave the US defenseless against other countries’ unfair trading practices. On the contrary, repealing Section 338 would remove the possibility that yet another law that has never been used to impose tariffs suddenly becomes the president’s mechanism of choice for taxing import-consuming Americans. The time is ripe for Congress to reclaim its constitutional authority over tariffs and US trade policy.
