WASHINGTON, D.C. — President Donald Trump invoked Section 338 of the Tariff Act of 1930 on August 22, 2026, to impose a 50% tax on $20 billion worth of Canadian imports. This action marked the first time any U.S. president had used this dormant legal authority.

The tariffs target goods including hockey sticks and cement, which are unconnected to the dairy, auto, and alcoholic beverage sectors cited by the administration as justification. The White House stated that Canada discriminates against U.S. exports in those specific industries.

Section 338 of the Tariff Act of 1930 authorizes the president to impose tariffs of up to 50% on imports from countries that discriminate against U.S. businesses. No U.S. president had used this provision prior to President Trump, though State Department records indicate the U.S. considered using it against Spain in 1932 and against Communist China in 1949 without proceeding.

Harrell and Hillman also stated that Canada's dairy market protection rules apply to many trading partners and do not single out U.S. farmers for discrimination. The United States agreed to Canada's dairy tariff quota system in the North America trade pact negotiated by President Trump during his first term.

John Veroneau, former general counsel for the U.S. Trade Representative and adjunct professor at University of Maine Law School, defended the move. He stated that Section 338 tariffs are justified when another country discriminates against U.S. imports by taxing them more than imports from other countries.

Veroneau added that Canada discriminated against U.S. imports when it imposed retaliatory tariffs on U.S. products last year. "Courts will rightly feel obliged in the face of any challenge (to decide): Are the statutory requirements met or are they not met, however ludicrous the broader context might be." Veroneau said.

Ryan Majerus, a partner at King & Spalding and former U.S. trade official, noted the novelty of the legal situation. "This law is literally a blank canvas because it’s never been litigated," Majerus said.

Sara Albrecht, CEO of the Liberty Justice Center, offered a different legal perspective. She stated there is a strong argument that Section 338 was superseded by the Trade Expansion Act of 1962 and the Trade Act of 1974.

Albrecht stated she has not received significant response from businesses willing to sue the government over the Section 338 tariffs. As of late August 2026, no lawsuit has been filed challenging the tariffs on Canadian imports.

Canada implemented dollar-for-dollar retaliatory tariffs in response to the U.S. Section 338 tariffs. The trade dispute follows other recent legal challenges to presidential tariff actions.

The Supreme Court rejected President Trump's invocation of a 1977 national security law to impose tariffs on nearly every country in February 2026. A specialized trade court in New York rejected a subsequent set of tariffs imposed by President Trump on August 1, 2026, though the government was allowed to continue collecting the taxes pending appeal.

Why It Matters

The use of Section 338 represents an expansion of executive authority in trade policy, utilizing a law that has sat unused for nearly a century. The lack of prior litigation means courts must interpret statutory requirements without established precedent, creating uncertainty for businesses and trading partners.

The retaliatory measures by Canada and the potential for further legal challenges highlight the volatility introduced by invoking dormant statutes. With no current lawsuits filed, the immediate business response appears muted, but the legal questions regarding whether newer trade acts supersede Section 338 remain unresolved.

Timeline

The Tariff Act of 1930, also known as the Smoot–Hawley Tariff Act, was signed into law by President Herbert Hoover on June 17, 1930. On January 12, 2026, a notice of institution of investigation was issued regarding certain power converters, circuit board assemblies, and computing systems containing the same, following a complaint filed with the U.S. International Trade Commission.

On August 1, 2026, Peter Harrell and Jennifer Hillman argued that the Trump administration made no attempt to calculate the dollar amount of damage from Canadian trade practices when imposing Section 338 tariffs.

Legal scholars Peter Harrell and Hillman wrote on August 1, 2026, that few trade lawyers were aware Section 338 remained on the books until Trump's second term. President Donald Trump invoked Section 338 of the Tariff Act of 1930 to impose a 50% tax on $20 billion worth of Canadian imports on August 22, 2026.

What's New

The Tariff Act of 1930 raised tariffs on over 20,000 imported goods to shield American industries from foreign competition during the onset of the Great Depression.