As we anticipated in our earlier trade update following the Supreme Court’s decision invalidating the IEEPA tariffs, the Administration has now turned to Section 338 of the Tariff Act of 1930, one of the alternative tariff authorities we covered, to assess new tariffs. On July 20, 2026, President Trump issued three proclamations invoking Section 338 for the first time in history to impose an additional ad valorem duty of 50% on certain Canadian goods involving alcoholic beverages, dairy products, and motor vehicles (the “Proclamations”). The proposed Section 338 duties are scheduled to take effect on August 19, 2026.
Section 338 empowers the President to impose additional duties of up to 50% when a foreign country imposes unequal restrictions or “discriminates in fact” against U.S. commerce. The President must determine that the additional duty “will offset such burden or disadvantage,” and the duty can take effect 30 days after the proclamation. Additionally, Section 338 directs the U.S. International Trade Commission to “ascertain and at all times to be informed” whether covered discrimination is practiced and, when it has reason to believe that it is, present the facts to the President “together with recommendations.”
The Proclamations cover a wide array of goods across numerous industries, including some that are not normally covered by the “categories” above. The 50% duty applies in addition to regular duties, other applicable Chapter 99 duties, antidumping and countervailing duties, etc. (i.e., it stacks on top of any other applicable duties), and no USMCA exemption applies to an otherwise covered product. Articles subject to Section 232 duties, qualifying civil aircraft products, and Chapter 98 are excluded. Covered goods admitted into a U.S. foreign-trade zone generally must be admitted in privileged foreign status.
Should the Section 338 duties take effect, we expect immediate litigation from affected importers, focusing on whether the allegedly discriminatory actions taken by Canada satisfy the requirements of Section 338, the broad product lists and maximum 50% rate reasonably offset the alleged burdens, and whether Section 338 required prior USITC findings or recommendations.
As the U.S. invokes Section 338 against a USMCA partner, this action may further strain bilateral trade relations and become an issue in the ongoing USMCA review, including discussions concerning the renewal of the agreement.
Please stay abreast of updates regarding the potential Section 338 duties. We will provide further trade updates as they become available. Stay tuned.
