On July 20, 2026, President Trump signed three proclamations imposing 50 percent ad valorem duties on certain goods from Canada as a means to offset discriminatory trade practices concerning American exports of motor vehicles, dairy, and alcoholic beverages. The President issued these proclamations pursuant to Section 338 of the Tariff Act of 1930. That section of the Tariff Act confers on the President the authority to “specify and declare new or additional duties” in response to either “any unreasonable charge, exaction, regulation, or limitation which is not equally enforced upon the like articles of every foreign country” or “[d]iscriminat[ion] in fact against the commerce of the United States.” Section 338 authorizes the imposition of duties up to 50 percent ad valorem and contains no automatic sunset provision.
The additional duties apply to all covered goods regardless of whether the good is considered originating under the USMCA. The three proclamations exclude from the additional duty goods subject to duties under Section 232. Currently, duties under Section 232 are imposed on, amongst other products, steel, aluminum, copper, and wood products. The President’s proclamation directs U.S. Customs and Border Protection to begin collecting these duties on goods entered on or after August 19, 2026.
The motor vehicles proclamation states that Canada has asymmetrically imposed a surtax on motor vehicles from the United States that is not imposed on motor vehicles from other countries. This, according to the Presidential proclamation, constitutes discrimination for purposes of Section 338, which defines discriminatory practices as a “law or administrative regulation or practice . . . [that] place[s] the commerce of the United States at a disadvantage compared with the commerce of any foreign country.” Similarly, the dairy proclamation identifies tariffs imposed on American-produced dairy products imported into Canada that are not imposed on imports from the EU. Finally, the alcoholic beverages proclamation references the total import ban of U.S. alcohol products imposed by certain Canadian provinces beginning in March 2025. Canada enacted no similar ban against any other country, which the Proclamation cites as evidence that this is a discriminatory practice.
Since the Supreme Court decision in Learning Resources v. Trump limiting the President’s authority to impose tariffs using the International Emergency Economic Powers Act, the administration has resorted to a number of different tools to implement the America First Trade Policy. Although the majority opinion in Learning Resources did not discuss or analyze Section 338, the Supreme Court recognized that certain statutory provisions contain “sweeping, discretion-conferring language.” Justice Kavanaugh’s dissent, however, expressly identified Section 338 as explicitly authorizing the President to impose tariffs. Because Section 338 has not been used, the President’s authority to impose tariffs under this statute has not been challenged in court.
Importantly, should the President’s authority to impose additional tariffs under this statute be challenged, following precedent in Federal Energy Commission v. Algonquin SNG, Inc., Section 338, like Section 232, has a clear “intelligible principle” to which the President must conform. Both the public interest must be served, and there must be, in fact, unequal enforcement or discrimination against American exports. This may limit a litigant’s ability to successfully challenge duties imposed under Section 338.
Notably, the Supreme Court recently denied a writ of certiorari challenging the President’s authority to modify tariffs imposed under Section 301. Compared to the President’s more recently used authority under Section 301 of the Trade Act of 1974 to impose tariffs on countries failing to prohibit the importation of goods produced with forced labor alongside those with excess capacity, Section 338 puts fewer constraints on the President’s action. Unlike Section 301, Section 338 simply requires a Presidential finding of discrimination or unequal enforcement to be lawfully utilized. Section 338 lacks the notice, investigation, and hearing process required by Section 301.
The factsheet released by the White House alongside these proclamations’ references that only the People’s Republic of China and Canada have retaliated against the United States’ tariff measures instead of negotiating. With the announcement of these duties, it remains unclear if Canada will ultimately come to the negotiating table. However, if Canada responds to the additional duties by maintaining or increasing its discrimination against commerce of the United States, Section 338 allows the President to take additional action and exclude products from importation. For more information on this topic, please reach out to Zachary J. Walker.