The president has revived a 96-year-old provision of the Smoot-Hawley Tariff Act that no president had ever used to impose tariffs — setting up a potentially significant battle over presidential power.
President Donald Trump has opened another front in his trade war with Canada, but this time the fight isn’t just about tariffs.
It’s also about presidential power.
Trump has invoked Section 338 of the Tariff Act of 1930 to impose additional 50% tariffs on roughly $20 billion worth of Canadian imports. The obscure Great Depression-era provision had never previously been used by a president to impose tariffs — and, as a result, courts have never established exactly how far the authority reaches.
That makes Trump’s latest trade move particularly significant.
After courts pushed back against some of his previous attempts to impose tariffs using other presidential authorities, the administration has reached nearly a century into America’s trade laws for another legal weapon.
This one could present the courts with an entirely new question.
A Law That’s Been Sitting Dormant Since 1930
Section 338 is part of the Tariff Act of 1930, legislation commonly associated with the Smoot-Hawley tariffs enacted during the Great Depression.
The provision gives the president authority to impose additional tariffs of up to 50% when another country discriminates against American commerce or places U.S. businesses at a disadvantage compared with competitors from other countries.
The Trump administration says Canada has done exactly that.
The White House specifically accused Canada of discriminatory treatment involving American dairy products, alcoholic beverages and motor vehicles. Trump signed three proclamations invoking Section 338 and imposing additional 50% tariffs on selected Canadian products.
The administration argues the tariffs are necessary to offset the economic disadvantage caused by Canada’s policies.
But there’s something extraordinary about the authority Trump is using:
No president had actually used Section 338 to impose tariffs before Trump.
According to legal scholars who researched the provision’s history, American officials considered using it against Spain in 1932 and Communist China in 1949, but ultimately didn’t.
For decades afterward, American trade policy increasingly moved toward negotiated trade agreements and newer laws establishing more detailed procedures for imposing tariffs.
Section 338 essentially sat untouched.
Until now.
Why Trump’s Tariffs Could Face a Court Challenge
The biggest legal question isn’t whether Section 338 exists.
It clearly does.
The question is whether the president can still use it in the sweeping manner the Trump administration claims.
Some trade-law experts argue that Congress effectively replaced or superseded Section 338 when it passed newer trade legislation.
Congress enacted the Trade Expansion Act of 1962, which includes presidential authority involving national-security-related imports, and the Trade Act of 1974, which established additional mechanisms for responding to unfair foreign trade practices.
Those newer statutes contain specific requirements and procedures that the government must follow.
That raises an obvious question:
Why would Congress establish those more detailed systems if presidents could simply reach back to Section 338 and impose tariffs without going through them?
Sara Albrecht, CEO of the Liberty Justice Center, told the Associated Press there is a strong argument that Section 338 was superseded by subsequent trade laws. Her organization represented businesses involved in the successful legal fight against Trump’s earlier tariff strategy.
Other lawyers disagree.
They point to a fundamental fact that could help Trump in court:
Congress never repealed Section 338.
And unlike some of the other statutes Trump has attempted to use for tariffs, Section 338 explicitly gives the president authority to impose additional duties.
That distinction could prove critical.
The Meaning of “Offset” Could Become Crucial
There’s another potential weakness in Trump’s legal argument.
Section 338 says tariffs can be imposed to offset the burden or disadvantage caused by another country’s discriminatory trade practices.
Critics argue the administration hasn’t sufficiently demonstrated how its 50% tariff rate corresponds to the actual economic damage allegedly inflicted on American companies.
The tariffs also extend beyond the industries at the center of the dispute.
More than 550 categories of Canadian products have reportedly been affected, including goods ranging from honey and alcoholic beverages to household products, smartphones and sporting goods. The measures cover approximately 5% of the value of Canada’s exports to the United States.
Legal scholars Peter Harrell and Jennifer Hillman have argued that the administration didn’t calculate the economic damage resulting from the alleged Canadian discrimination before imposing the tariffs.
That could eventually force a court to decide whether a president merely needs to declare that a tariff offsets discrimination — or whether the administration must actually demonstrate the connection.
Because Section 338 has never been litigated, there is virtually no judicial precedent answering that question.
There’s Also the USMCA Problem
The dispute becomes even more complicated because Canada isn’t simply another American trading partner.
The United States, Canada and Mexico operate under the United States-Mexico-Canada Agreement, or USMCA.
The agreement was negotiated during Trump’s first administration and replaced NAFTA.
Yet the administration says the new Section 338 tariffs apply even to covered Canadian products that would otherwise qualify for preferential treatment under USMCA. The Canadian government likewise confirms that USMCA-qualifying goods don’t receive a general exemption from the new Section 338 duties.
That creates another potential battlefield separate from the question of Trump’s authority under domestic American law.
A president might possess statutory authority under U.S. law while the resulting tariffs still raise questions about America’s obligations under USMCA or international trade rules.
Those are separate legal issues, and they could ultimately produce separate disputes.
Canada Isn’t Backing Down
Canada has responded aggressively.
Ottawa announced retaliatory tariffs covering hundreds of American products, with new rates of 15%, 25% or 50% scheduled to take effect September 8.
The targeted American goods include steel and aluminum products, cheese, fish, smartphones, appliances, motorcycles, clothing, household products and other imports.
Canada says its response will be effectively dollar-for-dollar.
That means what began as another tariff dispute could increasingly affect businesses and consumers on both sides of the border.
Companies importing affected products face higher costs. Some will absorb those costs. Others will attempt to find alternative suppliers.
And many will eventually pass at least some of the additional expense along to customers.
That’s when a trade war stops being an abstract political argument and starts appearing on receipts.
Trump’s Previous Tariff Strategy Already Hit a Legal Wall
The timing of the Section 338 strategy is especially important.
In February, the Supreme Court rejected Trump’s attempt to use the International Emergency Economic Powers Act, or IEEPA, as authority for sweeping tariffs.
That ruling was significant because the Constitution gives Congress the power to impose duties and regulate foreign commerce.
Presidents can exercise tariff authority when Congress delegates it to them — but they still have to operate within the authority Congress actually provided.
Section 338 potentially gives Trump a stronger statutory argument than IEEPA because the 1930 law expressly discusses additional duties.
But that doesn’t necessarily mean every use of Section 338 is legal.
The next fight could focus less on whether Congress delegated tariff authority and more on whether Trump complied with the limits Congress placed on that authority.
No Lawsuit — Yet
For all the legal debate surrounding the tariffs, there’s one important fact:
As of August 29, no lawsuit directly challenging Trump’s Section 338 tariffs has been filed.
The Liberty Justice Center has reportedly been looking for businesses willing to challenge the policy.
Finding plaintiffs may be more difficult than it was during the fight over Trump’s broader global tariffs because the Canada tariffs affect a much smaller share of overall trade.
The latest Section 338 duties cover only about 5% of Canadian imports into the United States, meaning fewer American companies are directly paying them and therefore fewer companies can easily demonstrate financial injury.
Still, legal experts expect challenges are likely.
George Mason University law professor Ilya Somin, who was involved in litigation over Trump’s previous tariffs, recently said the chances of litigation are very high because businesses, industry groups and states could ultimately suffer economic harm from the escalating trade dispute.
The Bigger Question Is Presidential Power
The most important part of this story isn’t whether hockey sticks, Canadian wine or cement become more expensive.
The larger issue is whether Section 338 can become a new presidential tariff weapon.
If Trump’s interpretation survives judicial scrutiny, future presidents could potentially turn to the same provision whenever they conclude another country is discriminating against American commerce.
That would revive a presidential power that essentially remained dormant for nearly a century.
If courts reject Trump’s interpretation, however, it would mark another significant limitation on a president’s ability to reshape American trade policy without obtaining new authorization from Congress.
And that’s why this dispute deserves attention beyond the immediate fight with Canada.
The Constitution places tariff and taxation authority primarily in the hands of Congress. Over decades, Congress has delegated portions of that authority to presidents under specific circumstances.
The fight now is over how far those delegations actually go.
Trump lost one major battle when the Supreme Court determined that emergency economic powers didn’t provide the tariff authority his administration claimed.
Section 338 is different.
This time, Trump has found a statute that actually mentions tariffs and actually delegates authority to the president.
But it was written 96 years ago, has never been used this way before, and has never been interpreted by a court.
That makes this much more than another chapter in the U.S.-Canada trade war.
It could become the next major test of the limits of presidential power.
Diamond K Report
Independent news, politics and commentary from Diamond K.
