US proclaims potential 50% tariffs on wide range of Canadian goods

On July 20, 2026, President Trump signed three Proclamations imposing a 50% tariff on a broad range of Canadian goods entering the United States pursuant to Section 338 of the Tariff Act of 1930. The new tariffs were set to take effect at 12:01 a.m. eastern time August 19, 2026. Following a three-day reprieve to allow Canada and the US to reach a broader trade agreement, the tariffs in the Proclamations took effect at 12:01 a.m. on August 22, 2026, after Canada withdrew from negotiations.¹ Each of the three Proclamations is aimed at separate Canadian trade measures that allegedly discriminate against US commerce in the following sectors: motor vehicles, alcoholic beverages, and dairy.

Here's what Canadian exporters need to know.

• What goods are subject to the new tariffs?
• What goods are excluded?
• How does this relate to the tariffs set aside by the US Supreme Court?
• Are CUSMA-originating goods exempt?
• What is the broader significance for Canadian exporters?
• What should affected companies do now?

What goods are subject to the new tariffs?

Each Proclamation imposes a 50% ad valorem duty (meaning an additional charge equal to 50% of the good's customs value) in addition to any other applicable duties, taxes, fees, or charges. The Alcoholic Beverages and Dairy Sector Proclamations take aim at a fairly specific set of Canadian goods while the Motor Vehicles Proclamation is much broader, targeting 339 types of Canadian articles as classified under the Harmonized Tariff Schedule of the United States (HTSUS).² The sectors expected to be most impacted are: 1) electronics and electrical equipment, 2) plastics, 3) furniture, bedding and lighting, industrial machinery and 4) paper and paperboard items.

What goods are excluded?

The new tariffs do not apply to:

• Goods already subject to Section 232 duties (steel, aluminum, copper, derivative articles, passenger vehicles and light trucks and parts, medium- and heavy-duty vehicles and parts, wood products/lumber, semiconductor articles, and patented pharmaceutical articles);
• Civil aircraft, aircraft engines, parts, and ground flight simulators meeting HTSUS General Note 6 criteria; and
• Per the White House fact sheet, energy, potash, fish, and critical minerals are also excluded from the Section 338 tariffs.

Although titled "Motor Vehicles," the third Proclamation does not in fact impose new duties on motor vehicles. Passenger vehicles, light trucks, and their parts are excluded from the new 50% tariff because they already carry the separate 25% Section 232 tariff on automobiles and auto parts imposed in March 2025, which remains unchanged by the tariffs.

How does this relate to the tariffs set aside by the US Supreme Court?

The new tariffs were enacted pursuant to Section 338 of the Tariff Act of 1930, which authorizes the President to impose duties to offset a foreign country's discriminatory or unreasonable treatment of US commerce.⁷

This is a provision of law that, until today, had never been used to impose tariffs - making these three proclamations a genuinely extraordinary development in US trade law. One of the most significant features of Section 338, and one that distinguishes it sharply from other tariff authorities, is it does not require any formal independent agency investigation or determination before the President can act.

Under Section 232 (national security) and Section 301 (unfair trade practices), which the Trump administration relied on extensively in its first term, tariffs are preceded by formal agency investigations with public comment periods that can take months. Section 338 carries no such requirement. The President acts on the basis of his own "finding of fact" that discrimination exists.

This is distinct from the tariffs imposed under the International Emergency Economic Powers Act (IEEPA), including a 35% tariff on certain Canadian goods, which the US Supreme Court struck down on February 20, 2026, as IEEPA does not authorize the President to impose tariffs: the statute contains no reference to tariffs or duties, and its authority to "regulate . . . importation" does not clearly confer that distinct power.

While that decision curtailed President Trump's ability to impose tariffs under IEEPA, it does not affect his authority to enact tariffs under Section 338, as discussed in our prior publication. The three new Section 338 tariffs will therefore likely not be impacted by the US Supreme Court's decision.

Are CUSMA-originating goods exempt?

No. Unlike some of previous tariff measures imposed by the Trump Administration, the tariffs in the Proclamations apply regardless of whether the goods qualify as originating under the United States-Mexico-Canada Agreement (CUSMA). Per each Proclamation's operative text, CUSMA preferential treatment does not provide relief from these Section 338 duties. This is a significant departure from the tariffs first introduced in early 2025.

What is the broader significance for Canadian exporters?

The absence of any CUSMA exemption across all three Proclamations is a significant development.

Canadian exporters in the affected sectors - alcoholic beverages, dairy, and the broad range of goods captured by the Motor Vehicles annex - cannot rely on CUSMA preferential treatment to avoid additional duties on these products and should assess their exposure accordingly.

None of the three Proclamations establishes a formal product-specific exclusion or relief process by which individual importers can apply for duty relief. Each Proclamation does, however, authorize the President to suspend, revoke, supplement, or amend the duties whenever he deems that the public interest requires such action, which means a relief process could be introduced by future presidential action without the need for new legislation.

What should affected companies do now?

• Engage trade counsel and customs brokers to confirm whether your products are captured by the annexes in each Proclamation to determine whether the 50% tariff applies.
• Assess supply chain and pricing exposure, particularly for goods currently imported into the US under CUSMA preferential rates, which offer no relief from these Section 338 duties.
• Watch for changes to the Proclamations, which each authorize the President to modify or terminate the scope of duties. President Trump has indicated that additional tariffs may be imposed on Canadian steel and auto sector goods starting on January 1, 2027. Trade counsel can help position your company to take advantage of such changes if they become available.
• Monitor for potential Canadian counter-measures as well as new support measures for impacted businesses. Canada has announced its intention to impose "dollar-for-dollar" retaliatory surtaxes on US imports starting on September 8, 2026.
• Section 338 is legally novel - it has never been judicially tested in the modern era - and its compatibility with the United States' WTO commitments is genuinely uncertain. While legal challenges will take time to resolve and tariffs are likely to remain in force pending any such challenge, affected parties should engage trade counsel to assess the full range of domestic and international legal options available to them.

Footnotes