Trump’s Canada Tariffs Rest on a 96-Year-Old Law Never Tested in Court — and Lawyers See Weak Spots

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President Donald Trump’s latest tariff fight with Canada has revived a piece of U.S. trade law that spent nearly a century gathering dust. Section 338 of the Tariff Act of 1930 gives presidents explicit power to impose additional duties when another country discriminates against American commerce, but no previous president actually used that authority to levy tariffs.

That absence of history has suddenly become important. Trump has imposed 50% duties on billions of dollars of Canadian goods, arguing that Canada unfairly disadvantages American automobiles, dairy products and alcoholic beverages. The statute clearly contains tariff authority, making it different from an emergency-powers law rejected by the Supreme Court earlier in 2026. Yet trade lawyers see several possible weaknesses, from the size and scope of the duties to questions about investigations, dairy rules and whether newer statutes displaced the Depression-era provision.

Section 338 Gives the President Real Tariff Power

Section 338 is obscure, but its language is unusually direct. Congress authorized the president to respond when a foreign country imposes an unreasonable restriction on American products that is not equally applied to comparable products from other countries, or otherwise discriminates against U.S. commerce. When that discrimination creates a burden or disadvantage, the president may proclaim additional duties considered necessary to offset it. The statute places a ceiling of 50% ad valorem, meaning a tariff equal to half the value of the imported product.

That explicit wording could become one of the administration’s strongest defenses. Section 338 does not require judges to infer tariff authority from broad language about regulating commerce. It expressly discusses additional duties, presidential proclamations and a maximum tariff rate. It also states that the duties normally begin 30 days after a proclamation and gives the president considerable discretion to suspend, modify or revoke an action. The unanswered question is whether Trump exercised that authority within the boundaries Congress actually established.

The Law Sat Dormant for Nearly a Century

The provision dates to the Smoot-Hawley Tariff Act, signed into law in June 1930 as the United States and much of the world were sinking deeper into the Great Depression. Section 338 itself had roots in a similar provision from the Tariff Act of 1922. Its original purpose was largely retaliatory: Washington wanted leverage against governments that treated American commerce less favourably than goods coming from their other trading partners.

Yet presidents repeatedly stopped short of activating it. Historical records examined by trade-law scholars Peter Harrell and Jennifer Hillman show that U.S. officials seriously considered using Section 338 against Spain in 1932. Officials discussed it again in connection with Communist China in 1949. Neither episode produced tariffs. For decades afterward, American trade policy increasingly relied on negotiated agreements and newer statutes rather than Section 338. By 2026, the provision had become so obscure that some experienced trade lawyers acknowledged they had barely considered it. Trump consequently entered almost entirely unexplored legal territory when he became the first president to impose tariffs under it.

Trump Used It to Hit Roughly $20 Billion in Canadian Trade

Trump signed three Section 338 proclamations on July 20, targeting what the White House described as discriminatory Canadian treatment of American motor vehicles, dairy products and alcoholic beverages. U.S. Trade Representative Jamieson Greer said the measures would impose 50% tariffs on nearly $20 billion in Canadian imports. The White House later postponed implementation while negotiations continued, with the duties ultimately taking effect on August 22.

The administration’s complaints differ by sector. Washington says Canadian vehicle measures imposed after earlier U.S. tariffs disproportionately hurt American automobiles. It argues that Canadian dairy quota rules provide European cheese exporters more favourable access than some American suppliers receive. On alcohol, the White House pointed to provincial and territorial decisions restricting or stopping purchases and sales of American products while continuing to handle alcohol from other countries. Yet the tariff lists reach far beyond those three industries. The White House itself highlighted covered imports ranging from wine to hockey sticks and cement, an expansive design that has become central to the legal criticism.

One Argument Says Newer Trade Laws Superseded Section 338

One of the broadest potential challenges would attack Section 338 before examining individual Canadian products. Some lawyers contend that Congress effectively displaced the old provision when it rebuilt American trade law during the decades after World War II. The Trade Expansion Act of 1962 created a detailed framework for tariffs justified by national security, while the Trade Act of 1974 established procedures for responding to unfair foreign trade practices. Those statutes generally involve defined investigations, findings and procedural safeguards.

Sara Albrecht of the Liberty Justice Center, whose organization helped challenge Trump’s earlier tariff program, has described the supersession argument as substantial. Historian and former State Department official Philip Zelikow has similarly argued that later legislation may have covered the territory once occupied by Section 338. But this is far from settled. Courts are normally reluctant to find that Congress repealed an existing statute merely by implication, particularly when the older language remains in the U.S. Code. Other legal scholars argue Section 338 remains completely valid. A lawsuit could therefore force judges to resolve a statutory question Congress itself never clearly answered.

The Word “Offset” Could Be a Bigger Problem

Perhaps the most concrete challenge lies in a single word Congress placed in Section 338: “offset.” The statute authorizes duties that the president determines will offset the burden or disadvantage caused by foreign discrimination. Harrell and Hillman argue that this language should require some relationship between the alleged commercial harm and both the products being tariffed and the amount of tariff revenue being imposed.

Their criticism focuses particularly on the automobile proclamation. The administration estimated that Canadian policies had cost U.S. producers about $5.6 billion in lost vehicle sales, according to their analysis of the White House documents. Yet they calculate that the related proclamation applies a 50% tariff to roughly $19.3 billion in annual imports, potentially generating duties approaching $10 billion if trade flows remained unchanged. They also note that the targeted goods are not narrowly confined to vehicles. Hockey sticks, cement and numerous other Canadian products appear on the lists. A court could therefore ask whether the tariffs are truly an economic “offset” or instead operate as broader retaliation designed to pressure Ottawa.

Canada’s Dairy System Creates an Especially Complicated Test

Dairy may provide the most technically complex dispute because Canada’s market-access system already exists inside negotiated trade agreements. Under CUSMA, known as USMCA in the United States, Canada maintains tariff-rate quotas covering 14 dairy categories. Imports within a quota receive preferential tariff treatment, while products entering above the quota can face much higher duties. The United States has fought Canada over the administration of those quotas for years.

The record is mixed rather than one-sided. A CUSMA dispute panel sided with the United States in the first major dairy case, finding that Canada improperly reserved portions of its quotas for processors. Canada subsequently changed its system. When Washington launched another challenge, however, two of three panelists concluded in 2023 that the revised measures did not violate the CUSMA provisions cited by the United States. Trump’s new proclamation instead compares treatment of U.S. cheese with access available to European producers under Canada’s separate agreement with the European Union. Critics argue that using Section 338 to attack arrangements incorporated into negotiated trade agreements stretches the Depression-era statute beyond its original purpose.

The Missing ITC Investigation Could Draw Judicial Attention

Section 338 repeatedly speaks of the president making factual findings, which gives the White House a plausible argument that Trump can determine discrimination himself. But another subsection assigns the U.S. International Trade Commission an ongoing responsibility to identify discrimination against American commerce and bring such practices to the president’s attention along with recommendations. That provision has raised a procedural question that has never been tested because Section 338 itself was never previously used to impose duties.

Harrell and Hillman note that historical practice under Section 338 and its 1922 predecessor appeared to envision the Tariff Commission—the modern ITC’s predecessor—as an important fact-finding body. They say there is no evidence the ITC conducted a Section 338 investigation of Canada before Trump issued the proclamations. That does not automatically invalidate the tariffs; the statutory language does not plainly say an ITC investigation is an absolute prerequisite. Still, courts often examine statutory structure as well as isolated sentences. Judges could decide that Congress expected independent factual development before such sweeping presidential action, especially when billions of dollars in commerce are involved.

Trump Has a Stronger Legal Foundation Than He Did Under IEEPA

The administration nevertheless enters any Section 338 lawsuit with an important advantage: the statute actually says the president may impose duties. That distinction became much more significant after the Supreme Court’s February 20, 2026 decision in Learning Resources v. Trump. The Court held that the International Emergency Economic Powers Act, or IEEPA, did not authorize Trump to impose his earlier sweeping tariffs. A majority emphasized that Congress normally delegates tariff authority explicitly and with limits.

Section 338 looks different on both counts. It expressly authorizes additional duties and caps them at 50%. Former U.S. Trade Representative general counsel John Veroneau has argued that courts should simply examine whether Canada’s conduct satisfies the statutory test for discriminatory treatment. That gives the government a credible route to victory even if judges dislike the broader trade confrontation. The Supreme Court’s IEEPA ruling therefore does not automatically doom the Canadian tariffs. Paradoxically, its insistence on clear congressional authorization may strengthen Trump’s argument that Section 338 provides precisely the kind of explicit tariff language IEEPA lacked.

No Challenger Has Yet Put Section 338 Before a Judge

Despite the legal theories circulating in Washington, Section 338 remained unchallenged in court at the end of August. The Liberty Justice Center has been searching for businesses that could serve as plaintiffs, but Albrecht told the Associated Press that finding companies willing to sue the federal government has been difficult. That practical hurdle matters because courts do not issue advisory opinions simply because academics or businesses believe a policy is unlawful. A plaintiff generally needs a concrete injury traceable to the challenged tariff.

The size of the program also reduces the pool of obvious challengers. The Associated Press estimated that the Section 338 measures cover roughly 5% of Canadian imports, far less than Trump’s earlier worldwide tariff program. Fewer affected importers means fewer companies directly paying the duties and therefore fewer potential plaintiffs with a clear financial stake. Businesses may also hesitate to spend heavily on litigation while Ottawa and Washington still have the option of negotiating the tariffs away. Until a case is actually filed, Section 338 remains what former trade official Ryan Majerus described as a legal “blank canvas.”

Canada Has Already Turned the Legal Experiment Into a Trade Fight

Whatever happens in court, the economic consequences are no longer theoretical. Canada announced that it would answer the new American measures dollar for dollar. Effective September 8, Ottawa plans counter-tariffs of 15%, 25% and 50% on U.S. goods covering C$27.6 billion in imports, with targeted sectors including steel, dairy, appliances, agricultural equipment, pulp and paper, and electronics. The federal government also announced C$7.5 billion in new and enhanced assistance for affected workers and businesses, on top of nearly C$25 billion in previous tariff-related support.

That escalation increases the importance of an eventual legal answer. If courts uphold Trump’s interpretation, Section 338 could transform from a historical curiosity into another powerful tool presidents can deploy against trading partners accused of discriminatory treatment. If judges narrow the law—by demanding closer proportionality, stronger factual investigations or a tighter connection between the discrimination and the products tariffed—its revival could prove short-lived. For Canada and the United States, however, the immediate question may be diplomatic rather than judicial. A negotiated settlement could remove the tariffs before America’s courts ever decide what Congress meant 96 years ago.

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