President Trump issued July 20 three separate proclamations imposing an additional 50 percent tariff on about $20 billion worth of imports from Canada under Section 338 of the Tariff Act of 1930, the first time that statute has been used for that purpose.
The White House said the new tariff is designed to offset “Canada’s discriminatory treatment of U.S. commerce” with respect to automobiles, alcoholic beverages, and dairy products, all of which are longstanding issues of concern for the U.S. However, the tariff will not take effect until Aug. 19, which could give the U.S. and Canada time to address those irritants before the tariff is assessed. Press sources cited Prime Minister Mark Carney as saying the two sides will immediately intensify negotiations, and there has been no indication thus far that Canada plans to impose retaliatory tariffs.
Background
According to the proclamations, 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 characterized Canada’s response as a decision to “discriminate against the United States rather than address Canadian trade barriers.”
Tariff Details
The new tariff will be effective for covered goods entered or withdrawn from warehouse for consumption on or after 12:01 a.m. EDT on Aug. 19, with no apparent termination date. The proclamations provide that the tariff could be modified in the future but give no indication as to when or under what conditions that may occur.
Affected products are set forth in the annexes of the 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 U.S.-Mexico-Canada Agreement. 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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