Section 338 Tariffs Latest in Back and Forth With Canada
New Section 338 tariffs on certain Canadian imports are just the latest development in an international tit-for-tat between the Trump administration and the Canadian government. After the U.S. chose not to renew the U.S.-Mexico-Canada Agreement (USMCA) in its current form, Trump has now thrown another jab in the ongoing sparring match with our neighbors to the north.
If you missed the news, he released three proclamations announcing 50% tariffs on Canadian imports under Section 338 of the Tariff Act of 1930. In the accompanying fact sheet, he pointed to what he calls unfair treatment of American products – namely dairy, vehicles, and alcohol.
But if you’ll recall, that “unfair treatment” was in response to the initial wave of increased tariffs against Canada when Trump took office to begin his second term. For a stretch of time, Canada even went so far as to stop stocking American alcohol in liquor stores across the country.
So, in a sense, Trump is correct when he says that Canada is using “discriminatory policies” against certain American imports. However, the Canadian government has consistently maintained that those policies were implemented in direct response to his initial U.S tariff measures.
Using Section 338 is also a new method for this administration. In fact, this is the first time any U.S. president has invoked Section 338 to impose tariffs on a trading partner.
Typically, this administration has preferred to use Section 301, 232, or even 122 to impose new tariffs on countries it has identified as engaging in unfair trade practices. Section 338 allows the president to impose duties up to 50% on imports from any country determined to disadvantage or discriminate against U.S. commerce. Its purpose is to offset trading practices that unfairly penalize U.S. exporters.
Whether that standard ultimately applies to Canada’s actions is largely beside the point. As has been the case throughout Trump’s second term in office, this will likely be another negotiating tactic aimed at securing more favorable trade terms.
It is important to note that this new round of tariffs isn’t scheduled to take effect until August 19, giving both countries additional time to negotiate a resolution. Considering the fraught relationship, though, it’s anyone’s guess what will happen between now and then.
Affected importers should certainly take the time to review each proclamation and make the necessary preparations prior to August 19. But once again, flexibility will be key since the next punch could land anywhere.
Scarbrough will continue to provide updates as they become available. In the meantime, we encourage importers to remain nimble throughout this process. If you have any questions about how these proclamations may impact your business, please contact your Scarbrough representative directly for assistance.
