President Trump has issued a proclamation delaying from Aug. 19 to Aug. 22 the imposition of an additional 50 percent tariff on about $20 billion worth of imports from Canada under Section 338 of the Tariff Act of 1930.
Background
Section 338 empowers the president to impose tariffs on imports of a foreign country to offset the burden or disadvantage from its discrimination against or unequal imposition on U.S. commerce. A White House fact sheet lists several Canadian policies that it said meet that description, including (1) tariffs and quotas on cars imported from the U.S. but not from other countries, (2) the administration of those quotas in a way that compels U.S. auto companies to invest in production in Canada instead of the U.S., (3) the cessation by all but two Canadian provinces and territories of the purchase, distribution, or retailing of U.S. alcoholic beverages without similar restrictions on other countries, and (4) tariff-rate quotas on U.S. cheese that are more restrictive than TRQs imposed on similar imports from the EU.
It is worth noting that many of these measures were imposed in retaliation for tariffs the U.S. first imposed on imports from Canada. Ottawa has claimed the U.S. tariffs violated the U.S.-Mexico-Canada Agreement, but the White House has characterized Canada’s response as a decision to “discriminate against the United States rather than address Canadian trade barriers.”
The proclamation implementing the three-day pause asserted that “Canada has expressed a commitment to remove the discriminations or unreasonable and unequal impositions at issue.” A social media message from the president claimed that after several weeks of negotiations the two sides had reached a deal, which the Office of the U.S. Trade Representative said “will include comprehensive market access for all American goods, economic security commitments, digital trade alignment,” and other provisions. However, Canadian Prime Minister Mark Carney was quoted in press articles as saying that “there is important work still to be done.”
Tariff Details
The new tariff is now slated to take effect for covered goods entered or withdrawn from warehouse for consumption on or after 12:01 a.m. EDT on Aug. 22, with no apparent termination date.
Affected products are set forth in the annexes of the three original proclamations, which are available here, here, and here. These products include wine and other alcoholic beverages, cosmetics, ice skates, hockey sticks, fishing rods, cement, paper and wood items, honey, textiles and apparel, machinery, jewelry, furniture, and other items.
Unlike previous additional tariffs, the Section 338 tariff will apply to all covered goods regardless of whether they are originating under the USMCA. It will also stack on top of any other applicable duties.
However, the tariff will not apply to energy, potash, products subject to Section 232 tariffs, articles subject to the World Trade Organization Agreement on Trade in Civil Aircraft (except drones), and certain other goods, such as fish or critical minerals.
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