Trump’s New Tariffs on Canada Face Fresh U.S. Court Test as Judges Press Administration

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President Donald Trump’s latest tariff strategy is back before U.S. judges, and Canada is once again caught in the middle. On September 30, the U.S. Court of International Trade examined a new round of duties imposed under Section 301 of the Trade Act of 1974, including a 10% tariff affecting certain Canadian goods.

The administration says the measures are designed to pressure major trading partners to better prevent products made with forced labour from entering their markets. The challengers say Washington stretched a targeted trade law into something much broader than Congress intended. After the Supreme Court rejected Trump’s use of emergency powers for sweeping tariffs earlier in 2026, the latest case is testing whether a different statute can support a similar strategy — and how much evidence the government must produce before imposing it.

The Court Is Testing a Different Tariff Power

The latest dispute centres on tariffs that took effect on July 24, 2026, after the Office of the U.S. Trade Representative investigated 60 major trading economies. Most were assigned additional duties of either 10% or 12.5%, depending partly on whether they already had rules intended to stop imports produced with forced labour. Canada landed in the 10% group. The measures cover an exceptionally large share of U.S. imports globally, although important exemptions substantially narrow the effect on Canadian trade.

A three-judge panel of the U.S. Court of International Trade heard arguments in Manhattan on September 30. The consolidated litigation asks whether USTR complied with Section 301, a law that allows the United States to respond to certain foreign acts, policies or practices that are deemed unreasonable or discriminatory and that burden or restrict U.S. commerce. Unlike the emergency statute previously used by Trump, Section 301 expressly provides trade-remedy authority. The fight is therefore increasingly about the limits and procedural requirements attached to that authority.

Judges Pressed Both Sides on How Much Evidence Is Enough

The hearing quickly focused on the depth of USTR’s investigation. According to reporting from inside the courtroom, the judges interrupted lawyers on both sides and repeatedly asked what level of detail Section 301 requires before tariffs can be imposed. One important question was whether the administration adequately connected the conduct of individual trading partners to an identifiable burden on American commerce rather than relying on generalized concerns about forced labour in international supply chains.

The questioning did not amount to a ruling. Judges also challenged the businesses contesting the tariffs, asking whether their objections effectively demanded additional paperwork rather than a fundamentally different investigation. At the same time, the government faced questions about whether it relied too heavily on Section 301’s broad language concerning “unreasonable” trade practices while giving insufficient attention to more specific statutory requirements. Justice Department lawyer Eric Hamilton defended the investigation, arguing that USTR did not need absolute certainty before determining that foreign practices were harming U.S. commercial interests.

Canada Already Has a Forced-Labour Import Ban

Canada presents a particularly complicated case because Ottawa already prohibits the importation of goods produced wholly or partly through forced labour. That prohibition took effect on July 1, 2020, through amendments to the Customs Tariff introduced to meet obligations contained in the Canada-United States-Mexico Agreement. The rule applies to imports regardless of their country of origin and is enforced at the border by the Canada Border Services Agency with support from other federal departments.

Ottawa has also been moving to strengthen the system. On June 12, 2026, the federal government introduced new legislation designed to reinforce Canada’s framework for keeping forced-labour goods out of the country. USTR nevertheless concluded that Canada, along with Ecuador, the European Union, Indonesia, Mexico and Pakistan, had failed to effectively enforce an existing prohibition. That distinction matters. Canada was not accused of having no ban at all; instead, Washington questioned its enforcement. USTR consequently placed Canada in the 10% category rather than the 12.5% category imposed on many other economies.

The Case Follows Two Major Battles Over Trump’s Tariff Powers

The September hearing cannot be separated from what happened earlier in 2026. On February 20, the U.S. Supreme Court ruled that the International Emergency Economic Powers Act, or IEEPA, did not authorize the president to impose tariffs. The 6-3 decision rejected the statutory foundation Trump had used for sweeping duties, including earlier measures involving Canadian imports. Chief Justice John Roberts’ opinion emphasized Congress’s central constitutional role over taxation and tariffs.

The administration then moved to another provision of the Trade Act, Section 122, for a temporary global tariff. That approach also encountered trouble. On May 7, the Court of International Trade ruled against the government in litigation challenging the Section 122 measures, although related appellate proceedings followed. Section 301 is different because Congress explicitly gave USTR authority to take trade action, including duties, following specified investigations. The Supreme Court itself highlighted those procedural requirements when contrasting Section 301 with the much broader interpretation of IEEPA that it rejected.

Small Businesses Are at the Centre of the Challenge

The legal fight is being driven partly by American companies whose business models depend on imports. Among the challengers are businesses connected with educational products, flooring, specialty spices and independent watches. Separate litigation was brought on behalf of Burlap & Barrel, a spice importer, and Collective Horology, while Learning Resources and hand2mind are among the companies involved in the consolidated proceedings. A coalition of 25 Democratic-led states has also challenged the tariff program.

That gives the dispute a practical dimension beyond arguments about presidential authority. Tariffs are collected from U.S. importers when goods enter the country, meaning businesses can face higher landed costs before deciding whether to absorb those expenses, negotiate with suppliers or raise prices. The plaintiffs argue Section 301 was designed to address identifiable foreign practices through tailored responses rather than impose nearly uniform tariffs across dozens of dramatically different economies. They have stressed that their case does not dispute the seriousness of forced labour; their argument is that the government must still satisfy the legal conditions Congress imposed.

The Administration Says It Conducted a Full Investigation

USTR rejects the suggestion that the tariffs appeared without an investigative record. The agency launched investigations involving 60 economies in March 2026 and held hearings in April. It says consultations were conducted with more than 45 governments. After releasing its findings on June 2, USTR opened another comment period and held three additional days of hearings in July before announcing the final tariffs.

The agency says the broader process included two rounds of public hearings and more than 2,100 public comments. During the stage dealing specifically with the proposed tariff response, USTR says it reviewed more than 1,600 written comments and heard testimony from more than 100 witnesses. Its substantive argument is that weak enforcement abroad allows products linked to forced labour to compete with goods made without it, distorting prices and placing compliant American producers at a disadvantage. The Justice Department told the court that Section 301 does not require proof with what its lawyer called “metaphysical certainty” before USTR can determine that such practices burden U.S. commerce.

CUSMA Compliance Greatly Changes the Exposure for Canada

The headline 10% rate does not mean every Canadian product entering the United States automatically faces another 10% duty. Canada’s government says goods qualifying for preferential treatment under CUSMA are exempt from the new Section 301 tariff. That makes rules-of-origin paperwork increasingly important for companies sending products across the border. A Canadian exporter must not only satisfy CUSMA’s origin requirements but ensure the importer actually claims the preferential treatment using the required certification.

Ottawa says more than 98% of tariff lines and more than 99.9% of bilateral Canada-U.S. trade are potentially covered by CUSMA’s preferential framework. Before the recent trade disputes, some exporters had little reason to complete additional origin paperwork when the normal U.S. tariff was already low or zero. The financial incentive is now much stronger. However, CUSMA compliance is not a universal shield. Separate U.S. Section 232 tariffs affecting sectors such as steel, aluminum and autos, as well as newer Section 338 measures affecting certain Canadian products, operate under different rules and can still apply.

Even a Court Victory Would Not End the Canada-U.S. Tariff Fight

The trade court is expected to issue a written ruling rather than resolve the dispute from the bench. One possibility raised during coverage of the hearing is a broad decision setting aside the Section 301 tariffs. Another is a narrower ruling requiring USTR to conduct additional work or provide more detailed explanations supporting its findings. That type of outcome would leave open the possibility of revised trade measures rather than permanently settling the broader policy dispute.

Whatever the three-judge panel decides, the litigation may not end there. Final decisions of the U.S. Court of International Trade can be appealed to the U.S. Court of Appeals for the Federal Circuit and ultimately may reach the Supreme Court. The Section 301 duties remained in force as the court considered the case. For Canada, the immediate exposure is moderated by the CUSMA exemption, but the legal stakes remain substantial. The case could help define how far future presidents can use Section 301 when imposing broad tariffs — and how specifically the government must justify treating dozens of trading partners at once.

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