Trump imposes 50% tariff hike on Canadian goods

President Donald Trump on Monday signed proclamations imposing additional 50% tariffs on certain goods from Canada in response to what the White House has called its North American neighbor’s “discriminatory treatment” of American products.

The tariffs, which take effect in 30 days on Aug. 19, aggravate trade tensions between the two traditional allies and threaten higher inflation as the war in Iran continues to eat at American pockets.

In retaliation for Canada’s tariffs affecting U.S. motor vehicles last year, the Trump Administration placed levies on a variety of Canadian goods—from certain electronics to sports equipment, from ornaments to flowers and flower products, and from essential oils to cowhides, among others.

The Administration also imposed tariffs on Canadian dairy products: Trump highlighted in his proclamation that Canada “denies to the United States the favorable treatment that Canada provides to the EU and its member States” for cheese products. It also hiked duties on Canadian exports of wine and other alcoholic beverages, with Trump citing Canadian provinces’ halt in purchasing American alcoholic beverages since March 2025, though some provinces have since lifted the ban on U.S. alcoholic goods.

Unlike some other tariff implementations, however, goods that flow across the border under the U.S.-Mexico-Canada Agreement (USMCA)—a trade pact Trump himself signed some six years ago—will not be exempt from the new regime, according to a White House fact sheet. The U.S. refused to renew the pact earlier this month, and while it is set to expire in 2036, the refusal has mired trade ties in further uncertainty.

The Office of the U.S. Trade Representative said Trump’s proclamations cover nearly $20 billion in imports from Canada, or about 5.2% of the almost $382 billion worth of goods that the U.S. imported from Canada in 2025. But the latest tariffs will not apply to energy, potash, products subject to tariffs under Section 232 of the Trade Expansion Act of 1962, and certain other goods, such as fish or critical minerals.

The White House argues that the new tariffs could offset what it deemed the “burden and disadvantage” on U.S. commerce and could level the playing field for American exports.

“While the Administration continues to secure fair and reciprocal trade deals with our trading partners, Canada, unlike other partners and allies, continues to retaliate against the United States for its efforts to rebalance trade and protect U.S. industry in national-security sensitive sectors,” said U.S. Trade Representative Jamieson Greer in a statement. 

Since Trump returned to the White House last year, the two neighbors’ trade relations have been on edge. In response to what the President deemed insufficient action to prevent drugs and migrants from crossing the border, he imposed heavy tariffs on Canada and Mexico, and Canada responded with its own levies on U.S. goods. Amid heightened tensions over the tariffs, Trump exacerbated relations when he floated that Canada become the U.S.’s 51st state to make the levies disappear, a suggestion that Ottawa’s leaders have flatly rejected. In recent days, the President cited the Canadian wildfires as justification for his latest tariff threats.

But with 30 days before the proclamations take effect, there’s plenty of time for the U.S.’s second-largest goods trading partner to negotiate. Trump has historically used threats of tariffs on target countries to reach agreements with them and advance his foreign policy agenda, despite several studies finding that American consumers bear the brunt of the economic costs of such levies when they do go in place.

Canada’s Prime Minister Mark Carney said in a statement his country is ready to negotiate with the U.S. on the latest threat of tariffs, adding that it “believes in the benefits of free and fair trade” and that “in all circumstances, Canada will work relentlessly and take any measures necessary to build our strength at home and to support Canadian workers, farmers, businesses, and families.”

The challenge of a new tariff regime

Following the February Supreme Court ruling that struck down most of Trump’s tariffs citing a lack of legal authority in using emergency powers, the Trump Administration has been actively seeking alternative ways to raise import taxes through other legal instruments.

In imposing the tariffs on Canada, the Administration has used an obscure statute: Section 338 of the 1930 Tariff Act. The legislation, also known as the Smoot-Hawley Tariff Act, is notorious for U.S. tariff increases that economic historians say deepened the Great Depression of the 1930s and impaired trade relations with other nations.

Section 338, in particular, allows the President to impose a duty of up to 50% on a country’s goods to “offset commercial disadvantages” if it factually finds that said country “discriminates” against U.S. commerce. 

Speaking to Reuters, John Veroneau, who worked in the USTR under former President George W. Bush's Administration and who has extensively studied the statute, said it aimed to ensure equal application of levies and that countries did not ⁠grant preferential tariff rates to other nations at the expense of American exports. 

But Trump is veering away from the statute’s principle in a “maximalist” way, Veroneau said: “These tariffs may be lawful under Section 338, but they at a minimum violate the spirit ​of Section 338, which was to create a world ​where countries apply the same tariffs on the ⁠same goods to all countries.”

Veroneau told Reuters that past Presidents had mulled imposing tariffs under Section 338, but no record could be found of anyone doing so until Trump’s orders on Monday. 

Some observers say the use of Section 338 is expected to face legal challenges, just like Trump’s previous court-dismissed tariffs.

Beyond the legal challenge is also the political one, as the new tariffs carry a risk for Republicans, who are about to head into the midterm elections this November. Trump’s approval rating on the American economy has been languishing, and the latest import taxes could push those ratings further down.

“Yet another absurd and harmful escalation in Trump's idiotic trade war with our close friend and ally,” Sen. Patty Murray (D, Wash.) posted on social media. “Trump's tariffs continue to hurt Americans AND Canadians alike.”