On August 19, 2026, the U.S. imposed 50% tariffs on $20 billion in Canadian goods using Section 338 of the 1930 Tariff Act, sparking legal challenges and business concerns as the policy’s constitutionality and economic impact remain untested.
Legal Uncertainty Over Section 338
The Trump administration’s use of Section 338 of the Tariff Act of 1930—never before tested in court—has raised immediate legal questions. This obscure provision, enacted during the Great Depression, allows the president to impose up to 50% tariffs on imports from countries that “discriminate” against U.S. businesses. President Donald Trump invoked it to target Canada over alleged unfair treatment of dairy, auto, and alcohol exports, marking the first time the law has been used in modern history 1news.
Legal scholars and trade experts argue the law’s validity is unproven. Ryan Majerus, a former U.S. trade official and partner at King & Spalding, called Section 338 “a blank canvas” due to its lack of judicial precedent. Sara Albrecht of the Liberty Justice Centre, which challenged earlier Trump tariffs, questioned why Congress would retain the provision after passing newer trade laws like the 1962 Trade Expansion Act and 1974 Trade Act, which limit presidential tariff authority to specific scenarios Apnews.
Trump's untested new tariffs on Canada raise big legal
Legal scholars Peter Harrell and Jennifer Hillman of Georgetown University noted contradictions in the administration’s approach: the tariffs lack calculations of “offset” damage to U.S. businesses and target imports unrelated to the alleged discrimination, such as hockey sticks and cement 1news. The 1930 Smoot-Hawley Act, which included Section 338, is infamous for exacerbating the Great Depression by triggering global trade collapses. Trump, however, has defended the law, framing it as a tool to protect American industries 1news.
Business Impacts and Consumer Concerns
Businesses across industries are bracing for the tariffs’ ripple effects.
Trump's new tariffs on Canada raises legal questions
Historical Context and Trade Law Evolution
The 1930 Smoot-Hawley Act, which included Section 338, was passed as Congress raised tariffs on hundreds of imports to protect American farmers and manufacturers during the Great Depression. Economists and historians criticize the tariffs for shutting down world commerce and worsening the depression. Trump, who calls himself “Tariff Man,” argues that the Smoot-Hawley levies came too late to rescue the American economy 1news.
In addition to raising tariffs, lawmakers in 1930 gave the president new power to impose them himself: Section 338 authorizes presidential tariffs of up to 50% on imports from countries that have discriminated against U.S. businesses. Before Trump, no president had actually used the statute 1news. Until Trump’s second term, few trade lawyers were aware that Section 338 remained on the books or understood what it did,
legal scholars wrote in the libertarian magazine Reason 1news.
Canadian Response and Diplomatic Tensions
Businesses brace for impact as Trump's 50% tariff on
Canada’s response has been swift. The country retaliated with dollar-for-dollar retaliation from Ottawa.
Unresolved Questions and Next Steps
The legal battle over Section 338’s constitutionality is likely to escalate. Critics argue the law’s ambiguity and historical legacy make it vulnerable to court challenges, while Trump’s team insists it is a valid tool for addressing trade imbalances. Meanwhile, businesses face a precarious wait: if the tariffs take effect, they could trigger inflation, supply chain disruptions, and broader economic fallout.
For now, the outcome hinges on two unresolved questions: Will the courts deem Section 338 lawful? And will the U.S. and Canada reach a compromise before the deadline? As one industry observer noted, The tariffs are making or breaking it.
