Everything You Need to Know About Trump’s 50% Tariffs on Canada

Washington: President Donald Trump has gone back to the Great Depression to find an obscure trade weapon he can use to take down Canada again.

Trump announced Monday that he would impose a 50% tariff on some Canadian products, escalating tensions with one of the United States’ closest allies.

The move threatens to push prices higher at a time when Americans are fed up with the high cost of living ahead of the Nov. 3 midterm elections. It’s also unclear whether Trump’s latest tariffs can withstand a legal challenge.

Tariffs are taxes imposed on foreign products. These are paid by importers in the United States, who often pass the costs on to consumers in the form of higher prices.

Trump punishes Canada for retaliatory tariffs

Trump used Section 338 of the 1930 Tariff Act to impose a 50% tariff on Canadian products, from hockey sticks to beer.

In a statement released Monday, Trump claimed Canada discriminated against American exports of automobiles, alcohol and cheese. He is angry that Canada retaliated last year against its own tariffs, which were imposed under the pretext that it needed to do more to stop fentanyl smuggling.

The president has repeatedly sparred with his northern neighbor, declaring that Canada should become the 51st state of the United States and threatening tariffs over wildfires that are sending thick smoke into the United States. His taunts, threats, and trade sanctions enraged Canadians and led to a boycott of American goods. For example, most Canadian provinces have banned the sale of alcoholic beverages from the United States.

The United States is renegotiating a trade agreement: the United States-Mexico-Canada Agreement. And the threat of Section 338 tariffs, which will go into effect on Aug. 19, gives the U.S. leverage in extracting concessions from Ottawa.

Part 338 ‘completely untested’

Nearly a century ago, as the U.S. and world economies collapsed, Congress passed the Tariff Act of 1930, imposing heavy duties on imports. These tariffs, known as the Smoot-Hawley tariffs, are infamous among economists and historians for limiting world trade and worsening the Great Depression. They played a memorable role in the 1986 movie “Ferris Bueller’s Day Off.”

Section 338 of the act gives the president the authority to impose tariffs of up to 50 percent on imports from countries that discriminate against U.S. companies. No investigation is necessary. There are also no limits on how long tariffs can remain in effect.

Section 338 tariffs have never been applied. U.S. trade negotiators have traditionally preferred another tool, Section 301 of the 1974 Trade Act; however, the United States used the threat of Section 338 duties as a bargaining chip in trade negotiations in the 1930s.

“This is completely untested,” said trade lawyer Ryan Majerus, a partner at King & Spalding and a former U.S. trade official. “It’s kind of hard to believe it’s been in the books for 100 years.”

Tariffs could hurt Canada more than the US

Canada is America’s second largest trading partner after Mexico. Last year, the United States imported $389 billion worth of goods from Canada, including crude oil and automobiles; this fell short of the $541 billion in imports from Mexico. Canada depends heavily on the US market: According to the Canadian government, about 72% of Canadian goods exports went to the US last year; this is down from almost 76% in 2024.

Still, Stephen Brown, chief North American economist at Capital Economics, calculates that Section 338 tariffs would affect just $20 billion of Canadian imports. As a result, they “will not have a significant impact on U.S. (economic) growth or inflation… The consequences for Canada will be greater but manageable.”

Brown thinks the 338 tariff would increase the U.S. tariff on Canadian imports from 3.1% to 5.6%.

How will tariffs affect Americans’ wallets?

Some of the largest imports are not included in the 50% tariff; Energy products such as motor vehicles, which are already subject to other tariffs, are also excluded. However, a wide range of products, from construction products such as cement and wood to agricultural products such as milk and honey, will be subject to tax.

In the past, Trump has frequently exempted goods that qualify for duty-free status under the USMCA, which he negotiated during his first term, from customs duties. But Monday’s announcement did not spare USMCA-compliant products.

“Everything that was previously exempt will now basically be covered,” said Barry Appleton, a law professor and co-director of the Center for International Law at New York Law School. “So while American consumers were previously protected from costs due to the USMCA exemption, this tariff will eliminate that.”

Experts say this will further increase the burden on US consumers’ wallets. Trump’s tariffs cost US households an average of $1,000 in 2025, according to the nonprofit Tax Foundation.

“Even with the significant disruptions, you’re still going to get a decent amount of goods, and those costs will be passed on to U.S. consumers at a time when people are feeling pretty consistently depleted by inflation,” said Greg Husisian, partner and chair of the international trade and national security practice at the law firm Foley & Lardner.

How do tariffs fit into Trump’s trade policy?

Monday’s announcement comes at a time when the president’s trade policies are shifting around the aggressive use of tariffs.

Trump last year imposed double-digit tariffs on imports from nearly every country in the world. He justified the tariffs by invoking the 1977 International Emergency Economic Powers Act (IEEPA) and declaring America’s long-running trade deficit a national emergency.

But in February, the Supreme Court struck down the tariffs, ruling that the president had exceeded his authority to declare them. As a result of this decision, the Trump administration was forced to refund the IEEPA tariffs paid by importers.

In an effort to rebuild the tariff wall around the U.S. economy, Trump invoked Section 122 of the Trade Act of 1974, which allows the president to impose global tariffs of up to 15% for up to 150 days. The Trump administration immediately announced 10% tariffs worldwide, but those tariffs expire Friday.

Trump is expected to replace temporary Section 122 tariffs with new Section 301 tariffs but has not yet done so.

Section 338 tariffs could face legal challenges

Trade lawyers have some doubts about whether Trump’s latest tariffs will stand. Peter Harrell, a visiting scholar at Georgetown University law school, posted on social media and identified some legal weaknesses in Section 338 tariffs. For example, it is unclear whether the U.S. International Trade Commission will conduct an investigation before the president imposes tariffs. It is also possible that Section 338 may have been obsolete by newer laws, including Section 301.

“The legal status of 338 is weaker than IEEPA,” Majerus said. “There’s at least a pretty good chance it’ll be rejected.”