Trump invokes obscure 1930 tariff law in Canada trade dispute
President Donald Trump has used a never-before-invoked provision of the Tariff Act of 1930 to impose a 50% tax on $20 billion in Canadian imports, prompting retaliation from Ottawa and raising legal questions about the Depression-era statute's validity.
President Donald Trump has escalated his trade war with Canada by invoking a 96-year-old statute so obscure that many trade lawyers were unaware it remained on the books. The administration last week used Section 338 of the Tariff Act of 1930 to impose a 50% tax on $20 billion worth of Canadian imports, a move that drew immediate dollar-for-dollar retaliation from Ottawa and further strained relations between the longtime allies.
The Section 338 authority has never been used by any president, let alone tested in court. "This law is literally a blank canvas because it's never been litigated," said Ryan Majerus, a partner at King & Spalding and a former U.S. trade official. The unprecedented nature of the action leaves open the question of whether the tariffs could survive a legal challenge, with some lawyers arguing the Depression-era law has been effectively superseded by more recent trade legislation.
The administration reached back to the Great Depression to sanction Canada for allegedly discriminating against U.S. dairy, auto, and alcoholic beverage exports this summer. The 1930 tariff legislation, known as the Smoot-Hawley Act after its congressional sponsors, was enacted as the U.S. and world economies collapsed. Congress raised tariffs on hundreds of imports in an attempt to protect American farmers and manufacturers, a move widely condemned by economists and historians for worsening the Great Depression by shutting down world commerce. Trump, who has called himself "Tariff Man," has argued the Smoot-Hawley levies simply came too late to rescue the American economy.
Beyond raising tariffs, lawmakers in 1930 granted the president new authority to impose them independently. Section 338 authorizes presidential tariffs of up to 50% on imports from countries that have discriminated against U.S. businesses. Before Trump, no president had actually used the statute. Legal scholars Peter Harrell and Jennifer Hillman of Georgetown University wrote this month in Reason magazine that "until Trump's second term, few trade lawyers were aware that Section 338 remained on the books or understood what it did." They cited State Department records showing the U.S. considered using Section 338 in disputes against Spain in 1932 and against newly Communist China in 1949, but never followed through. After the Depression, U.S. policy shifted toward negotiations rather than sanctions to open foreign markets, leaving Section 338 dormant in the law books.
Subsequent trade laws have created potential conflicts. The Trade Expansion Act of 1962 allowed for national security tariffs, and the Trade Act of 1974 gave the president power to address other countries' unfair trade practices. These laws limited presidential tariff authority to specific circumstances, such as national security threats and foreign currency crises, and required investigations and procedural steps beforehand. "There is a very strong argument that (Section 338) was superseded," said Sara Albrecht, CEO of the Liberty Justice Center, a libertarian advocacy group that represented businesses that successfully challenged earlier Trump tariffs before the Supreme Court. Albrecht questioned why Congress would have passed the later laws if it intended the president to retain Section 338 power.
Legal experts have identified additional weaknesses in the Section 338 tariffs. Harrell and Hillman argue the statute only authorizes tariffs that "offset" the harm a foreign country's trade practices cause American companies. The Trump administration made no attempt to calculate the dollar amount of damage from alleged discrimination against U.S. farmers, automakers, and alcoholic beverage marketers. The tariffs also target Canadian imports unrelated to those disputes, including hockey sticks and cement. Furthermore, Canada's dairy protections do not single out U.S. farmers, as the rules apply to many other trading partners. The U.S. agreed to the Canadian dairy quota system in the North America trade pact Trump himself negotiated during his first term, leading Harrell and Hillman to call it "incongruous, to say the least, for the United States to denounce as discriminatory the very terms it agreed to."
John Veroneau, former general counsel for the U.S. Trade Representative, defended the tariffs as straightforward, saying they are justified when another country taxes U.S. imports more heavily than imports from other countries. He noted a "perverse irony" in Canada's response to earlier Trump tariffs with retaliatory duties on U.S. imports. "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. Trump's other tariff tools have already faced setbacks in court, with the Supreme Court in February rejecting his use of a 1977 national security law to impose tariffs on nearly every country.
