What to know about the 50% tariffs Trump is imposing on Canada

WASHINGTON (AP) — President Donald Trump has reached back to the Great Depression for an obscure trade weapon he can use to wallop Canada again.

Trump on Monday announced 50% tariffs on some Canadian products, ratcheting up tensions with one of the closest U.S. allies.

The move threatens to push prices higher at a time when Americans are already frustrated with the high cost of living ahead of the Nov. 3 midterm elections. It’s also unclear whether Trump’s latest tariffs would survive a legal challenge.

Tariffs are taxes on foreign products. They’re paid by importers in the United States who often pass the costs along to consumers in the form of higher prices.

Trump punishes Canada for its retaliatory tariffs

Trump invoked Section 338 of the Tariff Act of 1930 to impose 50% tariffs on Canadian products ranging from hockey sticks to beer.

In proclamations issued Monday, Trump claimed that Canada discriminates against American exports of autos, alcohol and cheese. He is angry over Canada’s retaliation against his own tariffs last year, which were imposed under the pretext that Canada should do more to stop fentanyl smuggling.

The president has repeatedly sparred with his northern neighbor, declaring that Canada should be the 51st U.S. state and threatening tariffs over wildfires that have sent heavy smoke wafting over to the United States. His taunts, threats and trade sanctions have enraged Canadians and led to boycotts of American goods. Most Canadian provinces, for instance, have banned the sale of alcoholic beverages from the United States.

The U.S. is renegotiating a trade pact — the US-Mexico-Canada Agreement. And the threat of Section 338 tariffs, set to take effect Aug. 19, gives the United States leverage to seek concessions from Ottawa.

Section 338 is ‘completely untested’

Nearly a century ago, with the U.S. and world economies in collapse, Congress passed the Tariff Act of 1930, imposing hefty taxes on imports. Known as the Smoot-Hawley tariffs, they are notorious among economists and historians for limiting world commerce and making the Great Depression worse. They made a memorable cameo in the 1986 movie “Ferris Bueller’s Day Off.”

Section 338 of the law authorizes the president to impose tariffs of up to 50% on imports from countries that have discriminated against U.S. businesses. No investigation is required. Nor is there any limit on how long the tariffs can stay in place.

Section 338 tariffs have never been imposed. U.S. trade negotiators traditionally have favored another tool, Section 301 of the Trade Act of 1974 — though the United States used the threat of Section 338 levies as a bargaining chip in trade talks in the 1930s.

“It’s completely untested,” said trade lawyer Ryan Majerus, a partner at King & Spalding and a former U.S. trade official. “It’s kind of hard to believe it’s been on the books for 100 years.’’

Tariffs could hurt Canada more than the US

Canada is America’s second-biggest trading partner behind Mexico. The United States last year imported $389 billion worth of goods from Canada — led by crude oil and autos — behind only the $541 billion in took in from Mexico. Canada depends heavily on the U.S. market: Nearly 72% of Canadian goods exports went to the United States last year, down from almost 76% in 2024, according to the Canadian government.

Still, Stephen Brown, chief North America economist at Capital Economics, calculates that the Section 338 tariffs will hit only $20 billion worth of Canadian imports. As a result, they “will not have any major implications for U.S. (economic) growth or inflation … The consequences for Canada will be greater, but manageable.’’

Brown reckons that the 338 levies would raise the U.S. tariff rate on Canadian imports to 5.6% from 3.1%.

How the tariffs will affect Americans’ wallets

Some of the top imports are not included in the 50% tariffs; energy products are excluded, as are motor vehicles, which are already subject to other tariffs. But a wide range of goods, ranging from building products like cement and wood, to agricultural products like dairy and honey, will be subject to the tax.

In the past, Trump has often exempted from his tariffs goods that qualify for duty-free status under the USMCA, which he negotiated in his first term. But Monday’s announcement did not spare USMCA-compliant products.

“Anything that got exempted before is basically going to be covered now,” said Barry Appleton, a law professor and co-director New York Law School’s Center for International Law. “So where American consumers were shielded from the costs earlier because of the USMCA exemption, this tariff is going to remove it.”

And that will add to the burden already of U.S. consumers wallets, experts say. In 2025, the tariffs levied by Trump cost U.S. households an average of $1,000, according to the nonprofit Tax Foundation.

“Even with the significant carve-outs, you’re still going to be hitting a fair amount of of goods, and those costs are going to be passed onto U.S. consumers at a time when the U.S. consumer is telling people pretty consistently that they feel tapped out by inflation,” said Greg Husisian, partner and chair of law firm Foley & Lardner’s international trade and national security practice

How the tariffs fit in with Trump’s trade policy

Monday’s announcement comes at a time when the president’s trade policies, built around the aggressive use of tariffs, are in flux.

Trump last year imposed double-digit taxes on imports from almost every country on Earth. He justified the tariffs by invoking the 1977 International Emergency Economic Powers Act (IEEPA) and declaring America’s longstanding trade deficit a national emergency.

But the Supreme Court in February struck down the tariffs, ruling that the president had exceeded his authority in declaring them. As a result of that decision, the Trump administration has been forced to refund the IEEPA tariffs that importers had paid.

In an attempt to rebuild his tariff wall around the U.S. economy, Trump turned to Section 122 of the Trade Act of 1974, which allows the president to impose global tariffs of up to 15% for up to 150 days. The Trump administration promptly announced 10% worldwide tariffs — but they expire on Friday.

Trump is expected to replace the stopgap Section 122 tariffs with new Section 301 tariffs – but hasn’t done it yet.

Section 338 tariffs may face legal challenges

Trade lawyers have some doubts whether Trump’s latest tariffs will survive. Posting on social media, Peter Harrell, visiting scholar at Georgetown University’s law school, spotted some legal weaknesses in Section 338 tariffs. It’s not clear, for example, whether the U.S. International Trade Commission is supposed to conduct an investigation before the president can impose the taxes. And it’s also possible that Section 338 has been rendered obsolete by more recent statutes, including Section 301.

“The legal case for 338 is weaker than IEEPA,’’ Majerus said. “There’s at least a fair probability it will get overturned.’’

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Anderson reported from New York.