Untested in court, Trump’s new tariffs on Canada raise legal questions

President Donald Trump has opened a new front in his trade war with Canada by invoking Section 338 of the Tariff Act of 1930, an obscure Depression-era law that had never before been used by a president and has never been tested in court. Trump used it to impose 50% tariffs on about $20 billion worth of Canadian imports, prompting Canada to retaliate dollar-for-dollar and further straining relations between the two longtime allies. Because the law has never been litigated, even trade lawyers are uncertain about how courts would interpret it or whether it remains valid today.

Section 338 comes from the Smoot-Hawley Tariff Act, the 1930 law that sharply raised tariffs during the Great Depression. Economists and historians generally regard those tariffs as having worsened the collapse in international trade, although Trump argues they came too late to rescue the U.S. economy. Section 338 gave the president authority to impose tariffs of up to 50% on goods from countries found to discriminate against American businesses. The United States considered using the provision against Spain in 1932 and Communist China in 1949, but no president ever actually invoked it until Trump. After World War II, U.S. trade policy generally moved toward negotiated agreements rather than punitive tariffs.

Trump says Canada has discriminated against U.S. dairy producers, automakers and alcoholic beverage exporters. The administration therefore reached back to Section 338 as the legal basis for the new tariffs. But legal scholars see several potential weaknesses in that argument. One is that later trade laws—including the Trade Expansion Act of 1962 and the Trade Act of 1974—gave presidents more narrowly defined tariff powers and imposed investigations and procedural requirements before tariffs could be imposed. Critics argue those later laws may have effectively superseded the broad authority contained in Section 338.

There is also a dispute over whether Trump's tariffs actually satisfy Section 338 itself. Legal scholars Peter Harrell and Jennifer Hillman argue that the law permits tariffs designed to offset the harm caused by another country's discriminatory trade practices. But the administration did not calculate the amount of economic damage allegedly suffered by U.S. businesses before imposing the 50% levy. It also placed tariffs on Canadian products such as hockey sticks and cement that have little apparent connection to the disputes over dairy, automobiles or alcohol.

Canada's dairy system creates another complication. Canada imposes very high tariffs on dairy imports exceeding negotiated quotas, but critics note that the rules are not directed only at the United States—they apply to other trading partners as well. More significantly, the United States accepted Canada's dairy system as part of the North American trade agreement that Trump himself negotiated with Canada and Mexico during his first term. Harrell and Hillman therefore argue that it is difficult for the United States now to characterize as discriminatory trade terms it previously agreed to.

There is, however, a legal argument supporting Trump's position. Former U.S. Trade Representative general counsel John Veroneau argues that Section 338 can apply whenever another country taxes American imports more heavily than imports from other countries. Canada may have created exactly that situation when it responded to previous Trump tariffs by placing retaliatory tariffs specifically on U.S. products. In a court challenge, Veroneau says judges might focus narrowly on whether the statutory requirements of Section 338 have been met rather than on whether the broader trade war makes economic or diplomatic sense.

The controversy also comes after Trump's other attempts to expand presidential tariff power have encountered major legal problems. In February 2026, the Supreme Court struck down Trump's attempt to use a 1977 national-security law to impose double-digit tariffs on much of the world. When the administration tried another tariff mechanism to replace the lost revenue, a specialized federal trade court rejected that approach as well, although the government has temporarily been allowed to continue collecting those tariffs while the litigation proceeds.

Despite the legal questions surrounding Section 338, no business has yet filed suit challenging the Canadian tariffs. The Liberty Justice Center, which successfully represented businesses challenging earlier Trump tariffs, has been searching for companies willing to bring a case but says it has had difficulty finding plaintiffs. One reason may be that suing the federal government is costly and burdensome. Another is that these tariffs affect only about 5% of Canadian imports into the United States, making the group of companies able to demonstrate direct financial injury much smaller than with Trump's earlier worldwide tariffs.

There is also a possibility that the legal issue disappears before the courts ever settle it. U.S.-Canadian trade negotiations broke down on August 21, but officials could return to negotiations and reach a compromise that ends the tariff standoff. Some of the lawyers involved believe neither country ultimately wants the dispute to continue indefinitely.

The larger constitutional issue is significant: the Constitution originally gave Congress the power to impose tariffs, but over many decades Congress delegated increasing amounts of that authority to presidents. Trump's use of a dormant 1930 statute pushes that delegation into largely unexplored territory. The fight therefore is not simply about Canadian dairy products or the level of tariffs—it could become another major test of how much economic and trade power a president can exercise without Congress.