Canada-US trade tariffs imposed under Section 338 of the Trade Act of 1930 rest on an economic claim that a new Canadian think-tank study directly contradicts: far from exploiting the United States, Canada has been losing ground to its southern neighbour for a quarter of a century.
The Fraser Institute study, published 1 September 2026 and titled Squandering the Canadian Century Part 1: Comparing Economic Performance in Canada and the United States, was written by Grady Munro, Jake Fuss, and Joel Emes. Its findings sit awkwardly alongside the White House assertion that Canada has been ‘ripping off’ America for decades.
Canada Falling Further Behind the United States
In 1999, inflation-adjusted GDP per person in Canada stood at CA$48,076, against CA$58,842 in the United States. By 2024, Canada had reached CA$59,529, while the US had climbed to CA$83,286. The gap between the two, measured in inflation-adjusted Canadian dollars, more than doubled over that period, from CA$10,766 to CA$23,757.
The divergence accelerated sharply after 2014. From 2014 to 2024, GDP per person in Canada grew by just 3.2 per cent, compared with 20.1 per cent in the United States. Canada’s population expanded by 16.4 per cent over the same decade, against 6.5 per cent in the US, which meant aggregate output had to run faster simply to keep living standards from declining further in relative terms.
On median employment income, the picture is equally sobering. In 2010, median income in Canada was CA$32,580 against CA$38,706 in the US, a gap of CA$6,126. By 2024, Canada’s figure had risen to CA$37,361 while the US reached CA$46,024, widening the gap to CA$8,663.
Labour productivity tells the same story. Since 1999, Canadian workers increased productivity by 26.7 per cent. American workers increased theirs by 67.9 per cent. ‘Despite some early hopes prior to 2014, Canada has made virtually no economic progress relative to its southern neighbour and has instead fallen further behind where it stood at the turn of the century,’ the authors conclude.
The National Post, citing the study, notes that Canada’s national debt roughly doubled in less than a decade, rising from CA$687 billion in 2014-15 to nearly CA$1.5 trillion by 2025-26. The Trudeau government’s introduction in 2015 of a new top federal income tax bracket, raising the top rate from 29 per cent to 33 per cent on income above CA$200,000, compounded the fiscal drag. Fraser Institute researcher Grady Munro identified investment as ‘a huge determinant of productivity, which then impacts the incomes that Canadians earn,’ recommending spending restraint and a return to balanced budgets.
Private-sector employment as a share of total jobs in Canada fell from 81.2 per cent in 1999 to 78.5 per cent in 2024. In the United States, it edged in the opposite direction, rising from 85.8 per cent to 86.5 per cent over the same period. The authors are direct about the consequence: new government-sector jobs impose costs through the tax system that constrain wider economic growth.
The Canada-US Trade Tariffs in Legal Context
Against that economic backdrop, the legal architecture of the current dispute is considerable. In August 2026, following the collapse of bilateral trade talks, President Trump invoked Section 338 of the Trade Act of 1930 to impose 50% tariffs on certain Canadian goods, on the stated ground of offsetting Canadian discrimination against US commerce in alcoholic beverages, dairy, and motor vehicles. Those Section 338 tariffs apply regardless of United States-Mexico-Canada Agreement (USMCA) origin status and sit on top of existing Section 232 tariffs.
The White House statement of 25 August 2026 asserted that US vehicle exports to Canada had fallen 22 per cent over the prior year after Canada imposed 25% tariffs and company-specific quotas on American motor vehicles applied to no other country. It also claimed Canada had announced a further CA$27.6 billion in tariffs on US goods, including a 50% levy on American steel and aluminium, a 25% tariff on American fish, and a 25% tariff on American tools.
AP News reported that Canada’s retaliatory measures, covering more than 700 US-made products at rates of 15%, 25%, and 50% matching the corresponding US tariff rate on each product, took effect on 8 September 2026. The targeted goods include US steel, dairy, appliances, farm equipment, pulp and paper, and electronics.
Canadian Finance Minister François-Philippe Champagne framed the Canadian position in stark terms. ‘When the United States of America asked too much and offered too little, we made a choice. We chose Canada,’ he said, as reported by CNBC. Ottawa also unveiled a CA$7.5 billion support package for businesses and workers affected by US tariffs.
The next staging post in the dispute is 29 September 2026, when import bans related to the tariff escalation are scheduled to take effect, with product additions and removals set for 15 September. For in-house counsel with cross-border supply chains, the Section 338 mechanism, which bypasses USMCA preferences entirely, represents a qualitatively different legal exposure from the Section 232 tariffs that preceded it. Subject to any judicial challenge or negotiated resolution, that exposure crystallises at the end of this month.
