President Donald Trump invoked a 96-year-old Depression-era statute, Section 338 of the Tariff Act of 1930, to impose a 50% tariff on $20 billion worth of Canadian imports, triggering immediate retaliatory measures from Ottawa and raising complex legal questions regarding executive trade authority, according to the Associated Press.
Section 338 and the Smoot-Hawley Act Precedent
The Trump administration reached back to the Great Depression to penalize Canada for allegedly discriminating against United States dairy, auto, and alcoholic beverage exports, according to the Associated Press. The 1930 tariff legislation, commonly known as the Smoot-Hawley Act, was originally enacted by Congress to raise import duties and protect American farmers and manufacturers during economic collapse. While economists and historians widely criticize the historical Smoot-Hawley levies for worsening global commerce during the Depression, President Trump views the historic policy differently, arguing that the tariffs simply arrived too late to rescue the American economy, according to the Associated Press.
In addition to raising import taxes, the 1930 law granted the executive branch new powers under Section 338 to impose retaliatory tariffs of up to 50% on countries that discriminate against U.S. commerce. Prior to the recent action against Canada, no U.S. president had ever utilized the statute, leaving it untested in court. “This law is literally a blank canvas because it’s never been litigated,” Ryan Majerus, a partner at King & Spalding and a former U.S. trade official, told the Associated Press.
Legal Challenges and Obsolete Trade Authority Arguments
Legal scholars and advocacy groups question whether Section 338 remains valid, arguing that subsequent legislation rendered the Depression-era statute obsolete, according to the Associated Press. In a recent analysis published in the magazine Reason, legal scholars Peter Harrell and Jennifer Hillman of Georgetown University noted that few trade lawyers even knew the statute remained on the books before the current administration took office, according to the Associated Press. State Department records show the U.S. briefly considered invoking Section 338 in trade disputes against Spain in 1932 and against newly Communist China in 1949, but ultimately never did so.
Subsequent trade laws passed by Congress have established specific procedures and limitations on presidential tariff authority. Sara Albrecht, CEO of the Liberty Justice Center, pointed to the Trade Expansion Act of 1962 and the Trade Act of 1974 as evidence that Congress intended to replace older mechanisms with structured investigative requirements. “There is a very strong argument that (Section 338) was superseded,” Albrecht told the Associated Press, questioning why lawmakers would pass later authorities if the 1930 statute’s broad powers were meant to persist unchecked.
Disputes Over Dairy Markets and Retaliatory Tariffs
Legal experts have identified several vulnerabilities in the administration’s justification for the Section 338 tariffs, according to the Associated Press. Harrell and Hillman stated in Reason that the statute only permits tariffs that directly offset damages caused by foreign discrimination, yet the administration calculated no specific dollar figures for the alleged harm to U.S. dairy, automotive, and alcohol sectors, according to the Associated Press. Furthermore, the administration applied the taxes to unrelated Canadian goods such as cement and hockey sticks.
Analysts also note that Canada’s dairy protection policies apply broadly to multiple trading partners rather than singling out American producers, and that the U.S. previously accepted these quota terms under the North American trade pact negotiated during President Trump’s first term, according to the Associated Press. Conversely, John Veroneau, former general counsel for the U.S. Trade Representative, argued that the statute straightforwardly applies when a trading partner taxes U.S. goods more heavily than imports from elsewhere, pointing out that Canada imposed retaliatory tariffs in response to earlier U.S. duties, according to the Associated Press.
Current Status of Litigation and Next Steps
Unlike previous protectionist actions by the executive branch that faced immediate legal setbacks—such as the Supreme Court invalidating a 1977 national security tariff gambit in February—no businesses have yet filed a lawsuit challenging the Section 338 levies, according to the Associated Press. The Liberty Justice Center has sought plaintiffs among affected companies, but CEO Sara Albrecht noted that challenging the federal government presents significant hurdles, and the 5% scope of Canadian imports affected is smaller than previous broad actions, according to the Associated Press.
Trade lawyers suggest that ongoing uncertainty may prompt both governments to return to negotiations, according to the Associated Press. “I’m hopeful that somebody blinks, that they come to some agreement and it all goes away,” Albrecht told the Associated Press.
Frequently Asked Questions
What is Section 338 of the Tariff Act of 1930?
Section 338 is a provision of the Smoot-Hawley Act that grants the U.S. president authority to impose tariffs of up to 50% on imports from countries that discriminate against American commerce, according to the Associated Press.
Has Section 338 ever been used before?
No. Prior to the current administration, no U.S. president had ever utilized Section 338, leaving the statute completely untested in federal courts, according to the Associated Press.
Why are legal experts questioning the new tariffs on Canada?
Legal scholars argue that Section 338 was superseded by modern trade legislation passed in the decades following the Great Depression, and note that the administration did not calculate specific dollar amounts of economic damage to justify the offset, according to the Associated Press.
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