New U.S. tariffs on Canadian goods: What you need to know about the Section 338 proclamations

This article was prepared with the assistance of summer student Chan-Min Roh.

On July 20, 2026, President Donald Trump signed three Proclamations pursuant to Section 338 of the Tariff Act of 1930, imposing an additional 50% tariff on certain Canadian goods. The tariffs, which are scheduled to take effect on August 19, 2026, represent a significant escalation in Canada-U.S. trade tensions and mark the first time a U.S. president has invoked Section 338 to impose tariffs. Canadian businesses that import from or export to the United States should assess their exposure promptly.

What is Section 338?

Section 338 of the Tariff Act of 1930 empowers the President to impose tariffs up to 50% on imports from a country that is deemed to discriminate against U.S. products. Unlike Section 301 of the Trade Act of 1974, which requires a formal investigation by the United States Trade Representative, or Section 232 of the Trade Expansion Act of 1962, which requires a national security finding, Section 338 allows the President to act by proclamation alone without a prior investigation or hearing. The provision dates back to the original 1930 Smoot-Hawley Tariff Act and had never been used by any prior administration.

What the proclamations cover

The three Proclamations each target a different set of Canadian imports and correspond to three areas where the Administration alleges Canada has discriminated against U.S. commerce:

• Automobiles – The Administration alleges that Canada imposes tariffs and quotas on U.S. motor vehicles that do not apply to imports from other countries and that Canada administers these quotas in a way that compels U.S. auto companies to invest in production in Canada rather than in the United States. The Administration cites a roughly 22% decline (approximately US$5.6 billion) in Canadian imports of U.S. motor vehicles from April 2025 through March 2026, compared to the same period in 2024–2025. Notably, the automotive proclamation itself covers a broad range of non-auto-related goods in addition to motorcycles.
• Alcoholic beverages – The Administration states that all but two Canadian provinces and territories halted the purchase, distribution or retailing of U.S. alcoholic beverages beginning in March 2025, without imposing similar restrictions on products from other countries. It cites an approximately 81% decrease (approximately US$582 million) in Canadian imports of U.S. alcoholic beverages from March 2025 through February 2026, compared to the prior year.
• Dairy – The Administration argues that Canada’s tariff-rate quotas on U.S. cheese are more restrictive than those imposed on similar EU cheese imports, despite Canada maintaining trade agreements with both trading partners.

Combined, the three Proclamations are estimated to affect nearly US$20 billion in Canadian imports, equivalent to approximately 4.9% of total U.S. imports from Canada in 2024. Covered products span a wide range, from wine and hockey sticks to cement.

Key features of the new tariffs

Several aspects of the Section 338 tariffs are particularly noteworthy for Canadian businesses:

• USMCA compliance does not provide an exemption – Unlike most previous U.S. tariff actions, the Section 338 tariffs apply to all covered goods regardless of whether a product qualifies as originating under the Canada-United States-Mexico Agreement (USMCA). This is a significant departure from earlier tariff measures, where a valid certificate of origin generally provided an exemption.
• The tariffs stack on top of existing duties – The 50% tariff applies in addition to any other duties, taxes and fees already owed on the covered goods rather than replacing them.
• Certain goods are excluded – Energy products, potash, products already subject to Section 232 tariffs (steel, aluminum, copper, automobiles and auto parts), fish and critical minerals are excluded from the Section 338 tariffs.
• Effective date – The tariffs take effect on August 19, 2026, 30 days after signing.

Broader context

These tariffs arrive against a backdrop of broader Canada-U.S. trade uncertainty. The United States did not agree to renew the USMCA in its current form, triggering a new round of negotiations. U.S. negotiations with Mexico regarding the USMCA have advanced more quickly, while the United States and Canada have yet to formally initiate negotiations. The Section 338 tariffs may be intended, at least in part, to pressure Canada to engage in USMCA review discussions and to concede to U.S. demands.

The Administration has also characterized Canada, alongside China, as one of only two countries that chose to retaliate against U.S. tariffs rather than negotiate.

What Canadian businesses should consider

Given the scope and structure of the Section 338 tariffs, Canadian businesses should consider the following steps:

• Assess your product exposure – Review the product lists annexed to each of the three Proclamations to determine whether your goods are covered. The scope extends well beyond the headline categories of automobiles, alcohol and dairy.
• Review your reliance on USMCA – Businesses that have relied on USMCA-originating status to avoid U.S. tariffs should be aware that this compliance does not exempt goods from the Section 338 tariffs.
• Evaluate supply chain and pricing – The additional 50% duty, stacking on top of existing tariffs, may significantly affect landed costs and competitiveness in the U.S. market.
• Monitor for changes – The Administration has not always followed through on announced tariff measures, and the 30-day window before the tariffs take effect provides time for potential negotiation or adjustment.
• Revisit contractual arrangements – Consider whether existing supply agreements, pricing arrangements and risk-allocation clauses adequately address the possibility of additional tariff costs.

MLT Aikins continues to monitor developments in the Canada-U.S. tariff landscape. If your organization would like assistance in assessing how these new tariffs may affect your operations or cross-border strategy, please reach out to the MLT Aikins Corporate and Commercial and Competition/Antitrust, Investment and Trade teams.

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