Trump’s Untested Tariffs on Canada Spark Legal Uncertainty

POLICY WIRE — Washington, USA — President Donald Trump has ignited a trade conflict with Canada by invoking a nearly century-old and largely forgotten statute. Last week, Trump utilized Section 338 of the Tariff Act of 1930 to impose a 50% tax on $20 billion worth of Canadian imports. This action has led to immediate retaliation from Ottawa, further straining the already tense relationship between the two neighboring countries.

The tariff authority under Section 338 has never been exercised, nor has it been tested in court. Ryan Majerus, a partner at King & Spalding and a former U.S. trade official, noted, This law is literally a blank canvas because it’s never been litigated. Consequently, the viability of Trump’s tariffs in the face of legal scrutiny remains uncertain. Some legal experts contend that the Depression-era law may have been rendered obsolete by more recent trade legislation.

The Trump administration resorted to the 1930 tariff legislation, known as the Smoot-Hawley Act, to penalize Canada for allegedly discriminating against U.S. dairy, auto, and alcoholic beverage exports. The Smoot-Hawley Act, infamous for exacerbating the Great Depression by raising tariffs on numerous imports, granted the president the power to impose tariffs of up to 50% on imports from countries that discriminate against U.S. businesses.

Despite the passage of newer trade laws that limit the president’s tariff authority to specific circumstances, such as national security threats, legal scholars Peter Harrell and Jennifer Hillman argue that Section 338 may have been superseded. Sara Albrecht, CEO of the Liberty Justice Center, questions why Congress would pass subsequent trade acts if it intended for the president to retain Section 338 powers.

Additionally, legal experts point out weaknesses in the application of Section 338 tariffs. For instance, the Trump administration did not attempt to quantify the harm caused by Canada’s trade practices, nor did it target imports directly related to the alleged discrimination. Furthermore, the U.S. agreed to Canada’s dairy import system in a previous trade pact negotiated by Trump himself.

John Veroneau, former general counsel for the U.S. Trade Representative, defends the use of Section 338, arguing that it is justified when another country discriminates against U.S. imports. However, no lawsuit has been filed to challenge these tariffs yet, though the Liberty Justice Center is seeking plaintiffs willing to sue the government.

The smaller scale of the Section 338 tariffs on Canada, affecting only 5% of Canadian imports, means fewer companies are directly impacted, potentially reducing the incentive to challenge them in court. There is also a possibility that the two countries may resume negotiations to resolve the standoff.

Reporting by Policy-Wire (PW)