Canada’s most senior trade officials briefed business and labour leaders in Ottawa this week on Washington’s decision to invoke a tariff power that has lain unused since the 1940s, opening a new front in a dispute that has already outlasted the North American trade pact’s renewal deadline.
Donald Trump signed three proclamations on Monday under section 338 of the Tariff Act of 1930, imposing an additional 50 per cent duty on about $20bn of Canadian goods — roughly 5 per cent of Canada’s exports to the US — with effect from 12.01am eastern time on August 19.
The duties will apply whether or not the goods qualify as originating under the US-Mexico-Canada Agreement, the trilateral pact known in Canada as Cusma. That is the feature that has alarmed exporters: preference eligibility, until now the principal shield against the past eighteen months of US tariff action, does not protect against it.
Energy, potash, critical minerals and fish are excluded, as are goods already subject to section 232 duties on steel, aluminium, copper and vehicles, and articles covered by the World Trade Organization civil aircraft agreement. What remains is a list running from wine and dairy to cement, furniture, plywood, paper, clothing and hockey equipment. Corpay, the payments group, estimates the measures will lift the average tariff rate on Canadian goods by about 2.3 percentage points.
Members of the Advisory Committee on Canada-US Economic Relations met in Ottawa on Tuesday to weigh the impact. Dominic LeBlanc, the minister responsible for US trade, told them Canada had tabled detailed proposals to settle outstanding disputes and modernise the agreement, and that talks with Washington would deepen in the coming weeks. He was joined by Janice Charette, Canada’s chief negotiator to the US, and Mark Wiseman, its ambassador in Washington.
Mark Carney, prime minister, has called the proclamations the latest in a sequence of unilateral US actions taken in violation of the agreement, and said Canada would consider “all options” should the duties take effect. He briefed premiers by video on Tuesday and meets them in person in Charlottetown on Thursday. Both men have committed to intensifying negotiations over the next four weeks — a window that closes almost exactly as the tariffs bite.
The choice of statute is the substance of the story. Section 338 lets the president impose duties of up to 50 per cent on goods from a country found to discriminate against US commerce relative to that of any third country. It carries no requirement for an investigation, a hearing or a comment period, in contrast to section 301 of the Trade Act of 1974, under which the administration’s Brazil and forced labour actions have proceeded. A 1935 finding of discrimination was made without duties following; the last public record of any section 338 proceeding is from 1949.
The provision has become available because the alternatives have narrowed. The Supreme Court struck down the administration’s emergency tariffs in February, holding that the International Emergency Economic Powers Act conferred no such authority. A 10 per cent global levy imposed under section 122 of the Trade Act in its place was itself struck down by the Court of International Trade and survives only pending appeal. Section 338 is the third vehicle in eighteen months, and the first with no procedural gate at all.
Each proclamation rests on a separate finding. On alcohol, the White House points to the provincial and territorial bans on US products imposed from March 2025, which only Alberta and Saskatchewan have since lifted: US exports fell about 81 per cent, from roughly $718mn to $137mn, over the twelve months to February. Imports into Canada from Chile, Japan, Argentina, Ireland, New Zealand and Australia rose by between 13 and 26 per cent over the same period, with EU suppliers taking more than $100mn of the displaced volume — the third-country substitution on which the discrimination finding turns.
On vehicles, Washington cites tariffs and quotas applied to US-built cars but not to imports from elsewhere, and quota administration it says pushes carmakers to invest in Canadian rather than American plants. Canadian imports of US motor vehicles fell about 22 per cent, or $5.6bn, in the year to March. On dairy, the complaint is that Canada’s cheese quotas for US suppliers are more restrictive than those it grants the EU under its trade agreement with Brussels.
Legal challenge is regarded in Washington as a matter of timing rather than likelihood. Ilya Somin, the law professor who helped bring the successful emergency-powers case, argues that Congress superseded section 338 through later trade legislation. A second line of attack points to the statute’s own allocation to the US International Trade Commission of a standing duty to ascertain and report discriminations, a step no commission proceeding preceded here. John Thune, the Senate majority leader, has asked for further explanation of the grounds.
The action lands three weeks after the July 1 joint review at which the US declined to extend the trade agreement for a further sixteen years, triggering annual reviews until its built-in expiry in 2036. The pact remains in force. Jamieson Greer, US trade representative, told a Senate hearing on Wednesday he hoped to offer Canada and Mexico interim arrangements before the end of the year, without saying what they would contain. A third round of bilateral talks with Mexico opened in Mexico City this week; Canada was not among the announced participants.
For exporters, the immediate question is whether the eighteen-day window before the duties attach produces a settlement or a further escalation — section 338 permits the president to exclude a country’s goods outright if the discrimination is maintained. For everyone else, the question is who is next. “338 is the new IEEPA,” Chris Krueger of TD Cowen wrote to clients this week.