Trump's Canada Tariffs Rest on Untested 1930 Law
Trump's Canada Tariffs Rest on Untested 1930 Law
The News
A 96-year-old statute nobody had used
The legal basis for President Donald Trump's trade war with Canada is a Depression-era provision that no president has ever invoked and no court has ever reviewed.
AP wrote that the statute is "so obscure that many trade lawyers didn't even know it was still on the books," and that Trump's Section 338 authority "has never been used, let alone tested in court." Ryan Majerus, a partner at King & Spalding and a former U.S. trade official, told AP: "This law is literally a blank canvas because it's never been litigated."
The case that it no longer works
The central legal argument against the tariffs is that Congress replaced Section 338 without repealing it. "There is a very strong argument that (Section 338) was superseded," Sara Albrecht, chief executive of the Liberty Justice Center, told AP. Her group represented the businesses that beat Trump's earlier tariffs at the Supreme Court.
If Congress meant the president to keep that power, Albrecht asked, why pass the Trade Expansion Act of 1962 for national-security tariffs and the Trade Act of 1974 for unfair trade practices — both of which require investigations and procedural steps that Section 338 does not.
Harrell and Hillman raise a second problem. Section 338, they write, authorizes only tariffs that "offset" the harm a foreign country's practices do to American firms — and the administration made no attempt to calculate the dollar damage from Canada's treatment of U.S. dairy farmers, automakers and alcohol exporters. It then taxed Canadian goods with no connection to those disputes, including hockey sticks and cement.
They also argue Canada's dairy quota system does not single out Americans, since the same rules apply to other trading partners, and that the United States agreed to that system in the North American trade pact Trump himself negotiated in his first term. Calling the terms discriminatory now, they write, is "incongruous, to say the least."
Timeline
A week ago Trump used Section 338 of the Tariff Act of 1930 to impose a 50% tax on $20 billion worth of Canadian imports, the Associated Press reported in a piece published Saturday by PBS NewsHour and CTV News. Ottawa answered dollar for dollar.
Reactions
The case that it does
John Veroneau, a former general counsel at the U.S. Trade Representative's office, told AP the tariffs are straightforward: Section 338 applies when another country taxes U.S. imports more heavily than imports from elsewhere. In a "perverse irony," he said, Canada did exactly that when it retaliated last year against Trump's earlier tariffs.
"Courts will rightly feel obliged in the face of any challenge (to decide): Are the statutory requirements met or are they not met, however ludicrous the broader context might be," said Veroneau, an adjunct professor at the University of Maine Law School.
What's Next
The catch: no plaintiff
Nobody has sued. AP reported that no lawsuit challenging the Section 338 tariffs has been filed, and that the Liberty Justice Center has been hunting for a business willing to bring one. "I haven't had a lot of response from plaintiffs," Albrecht said. "Anytime you want to sue the government, it's a hard proposition."
Part of the reason is scale. The Section 338 tariffs cover about 5% of Canadian imports — far less than the worldwide tariffs Trump imposed in 2025 — so fewer companies pay them and fewer can claim injury.
Albrecht told AP she expects the two governments may simply settle: talks broke off Aug. 21, and "I'm hopeful that somebody blinks, that they come to some agreement and it all goes away."
Neither the White House nor the Office of the U.S. Trade Representative has responded publicly to the supersession argument, and until someone files suit, no judge will weigh it.
More
The 1930 law is the one known as Smoot-Hawley, after its congressional sponsors — the tariff package economists blame for choking off world trade as the Great Depression set in. Trump, AP noted, argues the opposite: that the Smoot-Hawley levies simply came too late to save the American economy.
Buried in it is a grant of power to the president: tariffs of up to 50% on imports from countries that have discriminated against U.S. businesses. Georgetown legal scholars Peter Harrell and Jennifer Hillman wrote this month in the libertarian magazine Reason that few trade lawyers were aware Section 338 remained on the books. Citing State Department records, they say Washington considered using it against Spain in 1932 and against Communist China in 1949, and used it neither time.
Trump's other tariff instruments have not fared well. The Supreme Court in February threw out his use of a 1977 national security law to tax nearly every country on earth, AP reported, and a specialized trade court in New York rejected the replacement tariffs — though the government is still collecting them while the case moves through the courts.
What it is costing
The fight is landing on prices in an election year. The Ohio Capital Journal reported this week that a developing trade war with Canada could hurt Republicans before the midterms as voters worry about costs, and that Maine's lobster industry escaped a threatened Canadian tax when Ottawa reversed course on Thursday.
Canada's own retaliation list, which The Frank covered Friday, runs to roughly 700 American products with seafood pulled back off it. Read that here: Canada Taxes 700 U.S. Goods; Seafood Pulled Off.
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