Section 338 tariffs on Canada, announced on 20 July 2026 and due to take effect from 22 August 2026, represent the Trump administration’s latest and most legally precarious use of executive tariff authority. The White House issued three proclamations invoking Section 338 of the Smoot-Hawley Tariff Act of 1930, imposing a 50% duty on approximately $20 billion of Canadian imports, a figure representing roughly 5% of total US imports from Canada.
A 30-day negotiation window was announced before the tariffs came into force, with a brief three-day suspension subsequently pushing the effective date to 12:01 a.m. Eastern time on 22 August 2026, according to C.H. Robinson’s client advisory. Unlike other tariff instruments deployed by the administration, Section 338 carries no built-in expiry: the duties are open-ended unless reversed by executive or judicial action.
The trigger for the breakdown in trade negotiations was the administration’s insistence on retaining earlier 50% tariffs on Canadian aluminium products and other goods. Ottawa’s refusal to accept those terms proved the sticking point.
Why Section 338 Tariffs on Canada Face Legal Challenges
The legal case against these tariffs turns on a threshold question: whether Section 338 is still operative law. Philip Zelikow of the Hoover Institution has argued that the provision was superseded by legislation enacted in 1962 and 1974, rendering it defunct. Commentary published on the TaxProf Blog reaches a similar conclusion, contending that Section 338 was effectively repealed by Section 252 of the Trade Expansion Act of 1962. Critically, the section has never previously been used to impose a tariff, meaning its supersession has never been litigated. The precise dispute concerns whether Section 338(d) specifically was subject to implied repeal by the later Trade Acts.
Georgetown University trade law specialist Peter Harrell has gone further, arguing that the tariffs are unlawful even on the assumption that Section 338 remains on the books. His analysis holds that the administration has not met the various preconditions the statute requires before the president may act.
Legal commentary identifies two further grounds on which challenges could succeed. First, courts may find that Section 301 of the Trade Act of 1974 was intended by Congress to serve as the exclusive framework for addressing discriminatory foreign trade practices, displacing Section 338. Second, the breadth of discretion the provision appears to confer could attract a non-delegation challenge. The Brownstein Hyatt trade alert notes that the absence of any judicial precedent interpreting the statute creates substantial uncertainty for both the government and importers.
A Pattern of Statutory Overreach
The Section 338 move is the latest in a series of executive tariff actions to have attracted or received judicial rebuke. The Supreme Court of the United States ruled on 20 February 2026, in Learning Resources, Inc. v. Trump (consolidated with Trump v. V.O.S. Selections, Inc.), in a 6–3 vote, that the International Emergency Economic Powers Act (IEEPA) does not authorise the president to impose tariffs. The Court held that IEEPA’s phrase ‘regulate importation’ does not reach tariff-setting, reasoning from both the ordinary meaning of ‘regulate’ and statutory context, as the Congressional Research Service set out in its analysis of the decision. All IEEPA-based tariffs terminated at midnight on 24 February 2026.
That ruling followed an en banc Federal Circuit decision on 29 August 2025, which had affirmed by 7–4 that IEEPA’s grant of authority to ‘regulate’ foreign commerce does not extend to sweeping tariffs without limits on scope, amount, or duration, as Steptoe’s trade blog reported.
On the same day as the Supreme Court’s ruling, the administration issued Proclamation 11012, invoking Section 122 of the Trade Act of 1974 for the first time since the provision entered into force, imposing a temporary 10% ad valorem surcharge on nearly all imports from nearly all countries, with duties scheduled to expire on 24 July 2026 unless extended by Congress. The US Court of International Trade struck those down on 7 May 2026. In Oregon v. United States and Burlap and Barrel, Inc. v. United States (Slip Op. 26-47), a 2–1 panel held that the proclamation failed to identify the type of ‘large and serious balance-of-payments deficits’ the statute requires, and entered a permanent injunction, according to Skadden’s analysis. The case has since been appealed. Gibson Dunn’s account of the Section 122 ruling and next steps sets out the implications for importers.
The IEEPA experience illustrates the financial cost of delay in granting injunctive relief. The Federal Circuit’s stay of the initial ruling against those tariffs allowed the administration to collect $166 billion in tariff payments before the Supreme Court acted. Much of the harm to importers, including lost sales and investment opportunities, cannot be remedied by subsequent refund. Billions remained unpaid five months after the Supreme Court’s decision, and the administration has sought to resist repayment of a portion of the sums collected.
Subject to any emergency application for a stay, the courts hearing challenges to the Section 338 tariffs will face immediate pressure to act quickly. The White & Case alert on IEEPA termination underlines how abruptly the legal landscape can shift once the judiciary moves. The absence of any prior judicial construction of Section 338, and the unresolved question of its implied repeal, mean the government’s legal position is weaker than it was when it deployed IEEPA. Courts now have a clear precedent for acting without delay.
