President Trump invoked the never-before-used Section 338 of the 1930 Tariff Act to hit Canada with 50 percent tariffs on $20 billion in imports, leaving courts and trade lawyers guessing whether the Depression-era law will survive a legal challenge.
The Trump administration has fired a new shot in the trade fight with Canada, dusting off a 96-year-old tariff law that no president has ever used. Last week, President Donald Trump invoked Section 338 of the Tariff Act of 1930 to impose a 50 percent tax on $20 billion worth of Canadian imports. The move targets what the administration calls discrimination against American dairy, auto, and alcoholic beverage exports, and Ottawa has already hit back with dollar-for-dollar retaliation.
The statute is so obscure that many trade lawyers did not know it was still on the books. Because Section 338 has never been tested in court, the tariffs now sit at the center of a legal gray zone that could shape the next chapter of Trump's trade agenda.
Section 338 was born in the Smoot-Hawley Tariff Act, the Depression-era legislation that raised duties on hundreds of imported goods. Lawmakers also handed presidents a new tool: the power to levy tariffs of up to 50 percent on imports from countries that discriminate against American businesses.
No president ever used it. Records show Washington considered the statute against Spain in 1932 and against communist China in 1949, but never pulled the trigger. For decades, U.S. trade policy leaned on negotiation rather than sanctions, and Section 338 sat untouched in the law books.
Trump changed that. His team reached back to the Depression-era statute to hit roughly 5 percent of Canadian imports with the maximum 50 percent rate, targeting sectors tied to Canada's protected dairy market, its auto policies, and its treatment of American alcoholic beverages.
Canada did not wait long to respond. Prime Minister Mark Carney's government announced dollar-for-dollar retaliation, and the two sides broke off talks on Aug. 21. The standoff has strained relations between two longtime allies and trading partners.
The dispute grows out of long-running complaints about Canada's dairy system, which shields domestic producers behind stiff quotas and tariffs. The Trump administration argues those barriers discriminate against U.S. farmers and manufacturers. Skeptics note that Washington signed off on the same system in the USMCA trade pact Trump himself negotiated in his first term.
With Section 338 never litigated, trade lawyers are split on whether the tariffs will hold up in court. Ryan Majerus, a former U.S. trade official now at King & Spalding, called the statute "literally a blank canvas because it's never been litigated."
Some legal scholars argue newer trade laws have quietly superseded Section 338. Georgetown University scholars Peter Harrell and Jennifer Hillman wrote this month that the Trade Expansion Act of 1962 and the Trade Act of 1974 gave presidents narrower, more conditioned tariff powers, raising questions about whether the old authority still stands.
They also note that Section 338 only authorizes tariffs that offset the harm of a foreign country's discrimination, and the administration made no attempt to calculate that damage. The tariffs also sweep in Canadian goods like hockey sticks and cement that have nothing to do with the dairy fight.
For now, no one has filed a lawsuit challenging the new tariffs. The Liberty Justice Center, which helped businesses beat Trump's earlier tariffs at the Supreme Court, has been hunting for plaintiffs willing to sue over Section 338 -- with little luck so far. The smaller scope of these tariffs means fewer companies are paying them, and fewer can claim injury.
The legal fight is just one front. The Supreme Court already threw out Trump's 2025 tariffs under a 1977 national security law in February, and a specialized trade court rejected the replacement tariffs, though the government can keep collecting the money while appeals move forward.
The Section 338 tariffs face the same gauntlet, but the administration argues the statute is squarely on its side: if a country taxes U.S. goods more than it taxes goods from elsewhere, the president has the authority to respond. Canada's own retaliatory tariffs, even critics concede, arguably fit that description.
There is also a chance the standoff ends without a courtroom. Both countries have signaled they would rather reach a deal than fight, and the talks that broke off last week could resume. If they do, the 96-year-old statute may go back into retirement -- but for now, it is the sharpest tool in Trump's trade arsenal, and it is aimed squarely at Canada.
President Trump invoked the never-before-used Section 338 of the 1930 Tariff Act to hit Canada with 50 percent tariffs on $20 billion in imports, leaving courts and trade lawyers guessing whether the Depression-era law will survive a legal challenge.
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