U.S. announces 50% tariffs on Canadian goods under Section 338
The additional 50% tariffs apply to selected goods beyond the alcohol, motor vehicle, and dairy sectors cited in the signed proclamations.
The United States has announced additional tariffs of 50% on certain Canadian goods under Section 338 of the Tariff Act of 1930, with the new duties set to take effect on August 19, 2026.
The U.S. President signed three proclamations on July 20 addressing Canadian trade measures involving motor vehicles, alcoholic beverages, and dairy products. Each proclamation applies the additional tariff to a separate list of Canadian products.
Section 338 allows the U.S. President to impose additional duties of up to 50% when another country is found to place U.S. commerce at a disadvantage compared with trade from other countries.
Each proclamation addresses a specific Canadian trade measure. However, the tariff applies to a broader list of goods set out in Annex II of each proclamation.
The alcoholic beverages proclamation responds to restrictions imposed by most Canadian provinces and territories on the purchase, distribution, or retail sale of U.S. alcohol.
Alberta and Saskatchewan lifted their restrictions in June 2025, while restrictions remained in place in other jurisdictions when the proclamation was issued.
The motor vehicle proclamation addresses Canada's 2025 surtax and tariff rate quota (TRQ) system for U.S. vehicles.
The proclamation states that Canada applies a 25% tariff to U.S. vehicles that do not qualify for preferential treatment under CUSMA. For qualifying vehicles, the tariff applies to the value of content that does not originate in Canada or Mexico, up to 85% of the vehicle's total value.
Canada also limits duty-free access through company-specific TRQs and has reduced those quotas for companies that moved manufacturing from Canada to the United States.
The dairy proclamation concerns Canada's allocation of TRQs for cheese under CUSMA compared with its allocation rules under the Canada-European Union Comprehensive Economic and Trade Agreement (CETA).
The proclamation focuses on differences in retailer eligibility under the two quota systems. Retailers are ineligible to receive and use quota allocations for cheese under CUSMA but are eligible under CETA.
The tariffs apply to covered goods entered for consumption, or withdrawn from a U.S. warehouse for consumption, on or after 12:01 a.m. Eastern time on August 19.
They apply regardless of whether the goods qualify as originating under CUSMA and are generally added to other applicable duties, taxes and fees.
The proclamations exclude goods already subject to Section 232 duties and articles covered by the World Trade Organization Agreement on Trade in Civil Aircraft, other than unmanned aircraft.
Energy, potash, certain fish, and critical minerals are among the goods that will not be subject to the additional tariffs.
Covered goods admitted to a U.S. foreign trade zone (FTZ) on or after the effective date will generally need to enter under privileged foreign status unless they qualify for domestic status.
At Cole International, we offer trade consulting and customs brokerage services to help Canadian businesses navigate changing tariffs and trade regulations.
Reach out to one of our trade professionals to review how the new tariffs may affect your exports to the United States.