Canada as the Latest Tariff Target: 50% Tariffs Proposed on Certain Canadian Imports

On July 20, 2026, President Trump issued three Proclamations involving dairy products, alcoholic beverages, motor vehicles, and other imports from Canada. The Proclamations threaten a 50% tariff on listed Canadian products beginning August 19, 2026. The Administration is relying on Section 338 of the Tariff Act of 1930 (“Section 338”) as the authority to impose these tariffs.

Legal Standard of Section 338

Section 338 is a statutory tool intended to allow the President to respond to discrimination by foreign countries. This Section allows the President to declare additional duties when he finds that the public interest will be served and when (1) the foreign country imposes an unreasonable limitation on products from the United States that is not equally imposed on articles from other countries, or (2) the foreign country discriminates against the commerce of the United States in a manner that places U.S. commerce at a disadvantage. The maximum rate for Section 338 tariffs is 50%.

Although Section 338 dates back to the Tariff Act of 1930, this trade tool has been rarely used, and it has lain dormant for decades.

Details of Canada Tariffs

The July 20 Proclamations reflect the growing trade tensions between the United States and Canada, which were recently on display during discussions surrounding the review of the USMCA. Each of the July 20 Proclamations allege a specific limitation or discriminatory practice as the basis for Section 338 tariffs. The dairy Proclamation cites to Canada’s tariff-rate quota (TRQ) for cheese, which is described as less restrictive towards the European Union under the Comprehensive Economic and Trade Agreement (CETA) as compared to the United States under the United States-Mexico-Canada Agreement (USMCA). The alcoholic beverages Proclamation references actions beginning in early 2025, where in response to the IEEPA tariffs, all but two Canadian provinces pulled U.S. liquor from their retail shelves and banned or restricted the sale of U.S. alcohol. Lastly, the motor vehicles Proclamation identifies Canada’s 25% tariff on imports of non-USMCA-eligible U.S. motor vehicles, as well as reduced TRQ volumes for U.S. companies that move manufacturing from Canada to the U.S.

The use of Section 338 against a USMCA partner, rather than the USMCA’s dispute settlement process, may further strain bilateral trade relations and become an issue in the ongoing review of the Agreement. As a result, the July 20 Proclamations are likely to shape the parties’ positions as they consider the Agreement’s future.

Exclusions and Inclusions from the July 20 Proclamations

The July 20 Proclamations cover a range of goods in the dairy, automotive, and alcohol beverage sectors. The affected imports also include other products, such as hockey equipment, plywood, glassware, and cement. Although USMCA rules remain in effect, the Proclamations stated that no USMCA exception will apply to the Section 338 tariffs. The identified carveouts are limited to energy, potash, certain fish and critical minerals, and products already subject to Section 232 tariffs, namely automobiles and steel.

What to Watch

The Section 338 tariffs are scheduled to take effect August 19, meaning the U.S. and Canada have a little less than one month to negotiate a potential resolution before the tariffs are imposed. Continued monitoring of announcements from the White House and United States Trade Representative is paramount for importers and exporters alike as the status of trade can shift overnight.

Contact Clark Hill

If you have questions regarding the content of this alert, please contact any member of Clark Hill’s International Trade Practice:

• Mark Ludwikowski (mludwikowski@clarkhill.com; 202.640.6680)
• Kevin Williams (kwilliams@clarkhill.com; 312.985.5907)
• Kelsey Christensen (kchristensen@clarkhill.com; 202.230.9889)
• Aristeo Lopez (alopez@clarkhill.com; 202.552.2366)
• Ashley Gifford (agifford@clarkhill.com; 202.640.6655)
• Laura M. Quesada (Lquesada@clarkhill.com; 202.240.0170)
• Amal Sheheen (asheheen@clarkhill.com; 202.552.2354)
• Onjoly Purification (Opurification@clarkhill.com; 202.552.2361)

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