White House Introduces Section 338 Tariffs on Canadian Articles

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Jul. 20, 2026
By: Austin J. Eighan

On July 20, President Trump invoked Section 338 of the Tariff Act of 1930 for the first time since Congress enacted the statute nearly a century ago. In three Presidential Proclamations, the Administration concluded that Canada discriminates against U.S. commerce in the automotive, alcohol, and dairy sectors and responded by imposing additional duties on a broad range of Canadian products.

Section 338 (19 U.S.C. § 1338) empowers the President to impose new or additional duties when a trading partner either:

1. Imposes, directly or indirectly…any unreasonable charge, exaction, regulation, or limitation which is not equally enforced upon the like articles of every foreign country; or
2. Discriminates in fact against the commerce of the United States, directly or indirectly, by law or administrative regulation or practice…in such manner as to place the commerce of the United States at a disadvantage compared with the commerce of any foreign country.

Unlike other trade statutes (e.g., Sections 301 or 232), Section 338 does not require a formal investigation before action. Once the President finds that the foreign country meets either of these criteria as a matter of “fact,” he may impose duties of up to 50%. If the country maintains or increases the alleged harmful practices, the President may entirely exclude their products from entry.

The automotive proclamation focuses on Canada’s tariff regime for U.S.-origin vehicles, including surtaxes and tariff-rate quotas (TRQ) that the Administration argues apply uniquely to U.S. products. The alcoholic beverages proclamation calls out provincial distribution systems, markups, and retail controls that, according to the Administration, limit the ability of U.S. producers to compete on equal terms in the Canadian market. The dairy proclamation targets Canada’s TRQ allocations for American goods, like cheese, that are “much more restrictive than the tariff-rate quotas imposed on similar imports of cheese into Canada from the EU, despite Canada having trade agreements with both the U.S. and the EU.”

To address these concerns, President Trump ordered additional 50% duties on the Canadian products listed in the proclamations’ annexes (see Annex I for automotive, alcohol, and dairy) beginning August 19. The new Section 338 tariffs will apply to all covered goods regardless of USMCA originating status. However, they will not apply to energy, potash, products subject to tariffs under Section 232, or other goods specifically identified in each proclamation (see Annex II for automotive, alcohol, and dairy). The long timeframe for implementation likely is intended to allow the U.S. and Canada to negotiate a resolution.

These proclamations offer the first real test of how the Executive Branch can use this long-dormant trade authority. If your company would like support in assessing potential increased duty liability or developing practical compliance and sourcing strategies to address these new tariffs, please reach out to one of our attorneys at Barnes, Richardson & Colburn.