U.S. Imposes 50% Section 338 Tariffs on Certain Canadian Imports (Tensions Escalate)

Published July 20, 2026 | Updated Aug. 25, 2026

Key Points

• Trump signed three Section 338 proclamations on July 20, 2026, adding a 50% duty on specific Canadian dairy, alcohol, and motor vehicle goods.
• Now takes effect August 22, 2026, CBP issued implementation guidance on August 21, 2026, confirming the August 22 effective date and the new HTSUS headings importers must use to file. See CBP Guidance section below.
• Importers should prepare, refer to – Section 338 Tariffs: How Canadian Exporters Should Prepare Before August 22
• USMCA origin does not exempt covered goods from this duty.
• Coverage extends beyond the headline sectors, including products like wine, hockey sticks, and cement.
• Energy, potash, Section 232 goods, and a few other categories are excluded.
• Action needed now: confirm whether your Canadian imports fall under any of the three annexes.
• Latest: On August 25, 2026, the White House released a statement accusing Canada of unfair trade practices and rejecting a recent U.S. offer for better market access

O​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​n July 20, 2026, President Trump signed three separate proclamations under Section 338 of the Tariff Act of 1930, imposing an additional 50% ad valorem duty on specific Canadian goods in the dairy, alcoholic beverage, and motor vehicle sectors.

According to the White House Fact Sheet, which summarizes the three proclamations, the tariffs respond to what the administration identifies as discriminatory treatment of U.S. products by Canada.

According to the proclamation, senior executive branch officials cited Canada’s expressed commitment to remove the underlying discriminatory measures, and recommended the short suspension in light of the status of ongoing negotiations between the two countries.

Update: U.S.-Canada Trade Tensions Escalate

On August 25, 2026, the White House released a statement accusing Canada of unfairly restricting U.S. commerce and choosing retaliation over negotiations. The U.S. pointed to Canada’s 25% tariffs and quotas on U.S. motor vehicles, restrictions on American alcoholic beverages, and restrictive dairy tariff-rate quotas. It also criticized Canada’s latest $27.6 billion in counter-tariffs on U.S. goods, including 50% tariffs on certain steel and aluminum products and 25% tariffs on fish and tools. President Trump called Canada “the most difficult and unreasonable” trading partner. Read the full White House statement.

CBP Guidance

On August 21, 2026, CBP issued implementation guidance (CSMS # 69606660) confirming filing instructions for the suspension and the August 22 effective date. At a high level:

• Effective date confirmed. The guidance applies to goods entered for consumption, or withdrawn from warehouse for consumption, on or after 12:01 a.m. Eastern time on August 22, 2026.
• New Chapter 99 headings for filing. Entries must use HTSUS headings 9903.03.12 through 9903.03.16, which correspond to the dairy, alcohol, and motor vehicle provisions plus two carve-out categories. Check the attached Section 338-Canada HTS List for the specific HTSUS classifications covered by each heading.
• 9903.03.12–9903.03.14 carry the 50% additional ad valorem duty and cover the dairy, alcohol, and motor vehicle goods identified in the underlying proclamations.
• 9903.03.15 and 9903.03.16 are listed at a 0% additional rate, covering specific excluded categories, including steel, aluminum, and copper derivative articles, certain passenger and commercial vehicles and parts, wood products, semiconductors, patented pharmaceuticals, and civil aircraft and related components.
• Stacking confirmed. Covered goods remain subject to any existing antidumping, countervailing, or other applicable duties, taxes, fees, and charges in addition to the new Section 338 duty.
• Chapter 98 and FTZ treatment addressed. The guidance sets out how Chapter 98 provisions interact with the additional duty and confirms that covered goods admitted to a foreign trade zone must generally be admitted under “privileged foreign status.”
• Drawback is available on the additional duty.
• Entry summary sequencing specified. CBP laid out the required order for reporting Chapter 98 and Chapter 99 HTSUS numbers alongside Section 301, 122, 232, and 201 trade remedy provisions on entry summaries.

Importers and brokers should confirm their entries reflect the correct Chapter 99 heading for each affected line before filing on or after August 22.

Proclamation Key Details

• The 3-day suspension applies to all three underlying proclamations (alcoholic beverages, dairy, and motor vehicles).
• CBP has been directed to suspend collection of the additional duties and to process any required refunds under its standard procedures.
• CBP, in consultation with Treasury, Commerce, USTR, and the ITC, will determine whether further HTSUS modifications are needed and will publish them in the Federal Register.
• This is a suspension, not a repeal. Unless extended or otherwise modified, the 50% duties are still on track to take effect August 22.

Read the full proclamation on WhiteHouse.gov

Section 338 Tariff Changes At a Glance

• Rate: An additional 50% ad valorem duty, on top of any existing duties, taxes, fees, and charges.
• Effective date: 12:01 a.m. Eastern time on August 22, 2026, for goods entered for consumption or withdrawn from warehouse for consumption on or after that date, following the 3-day suspension of the original August 19 effective date.
• USMCA does not provide relief. These tariffs apply regardless of whether a good qualifies for preferential treatment under USMCA.
• Three separate proclamations, three separate product lists. Each proclamation has its own Annex I and Annex II. Annex I sets out exceptions and other implementation details, while Annex II identifies the specific HTSUS classifications and Chapter 99 modifications covered. Products range across categories including wine, hockey sticks, and cement, in addition to the headline dairy, alcohol, and auto categories, so importers should not assume their goods are unaffected just because they don’t ship dairy, alcohol, or vehicles.
• Exemptions: The 50% duty does not apply to energy products, potash, goods already subject to Section 232 tariffs, aircraft covered under the WTO Agreement on Trade in Civil Aircraft, or certain other excluded goods such as fish and critical minerals.
• Foreign trade zones: Covered goods admitted to a U.S. FTZ on or after the effective date must be admitted under “privileged foreign status,” meaning the duty rate is locked in at time of admission rather than at withdrawal.

Sectors Targeted (Proclamations)

1. Dairy. The administration’s finding centers on Canada’s tariff-rate quota (TRQ) system for cheese. Canada allows EU retailers to access its CETA cheese TRQ, but excludes retailers from the equivalent USMCA cheese TRQ, a distinction the proclamation says disadvantages U.S. cheese exporters relative to their European counterparts even though Canada has trade agreements with both. Proclamation

2. Alcoholic beverages. Since March 2025, Canadian provinces and territories have restricted or halted the purchase, distribution, and retailing of U.S. alcohol. Ontario’s LCBO and Quebec’s SAQ pulled U.S. products from shelves and catalogues that month. Only Alberta and Saskatchewan have since reversed course, in June 2025. The proclamation cites an 81% drop in U.S. alcohol exports to Canada (from roughly $718 million to $137 million, March 2025 through February 2026 versus the prior year) while imports from countries like Chile, Japan, Argentina, Ireland, New Zealand, and Australia rose in the same window. Proclamation

3. Motor vehicles. Since April 2025, Canada has applied a 25% tariff on U.S. motor vehicles that don’t qualify for USMCA preferential treatment, and a 25% tariff on non-originating content for vehicles that do qualify, along with automaker-specific TRQs. The proclamation states Canada has reduced these quotas for companies that shifted production out of Canada. U.S. motor vehicle exports to Canada fell approximately 22% (from about $25.9 billion to $20.3 billion) over the year, while imports from Mexico, Japan, Korea, and Germany increased. Proclamation

Ambassador Greer’s Statement on the Section 338 Tariffs

Meanwhile, U.S. Trade Representative (USTR) Ambassador Jamieson Greer issued a statement following the proclamations.

Recommended Actions for Importers

Refer to: Section 338 Tariffs: How Canadian Exporters Should Prepare Before August 22

1. Screen every Canadian import against all three proclamations. Don’t rely on general product descriptions. Work through the actual HTSUS provisions and Chapter 99 instructions in Annex I and Annex II to each proclamation and the new 9903.03.12–9903.03.16 headings in CBP’s guidance, to confirm what’s actually in scope, since coverage extends well beyond the headline dairy, alcohol, and vehicle categories.

2. Model your landed-cost exposure now. Identify covered merchandise expected to be entered for consumption, or withdrawn from warehouse, on or after August 22, and layer the additional 50% duty on top of every other duty and fee that already applies.

3. Don’t count on USMCA to shield you. Covered goods remain subject to the Section 338 duty even when they qualify for USMCA preferential treatment. USMCA origin does not create an exemption here.

4. Revisit classification and origin with your broker. Confirm tariff classifications, bills of materials, and country-of-origin determinations are current and well documented, particularly for goods near the boundary of a covered provision or the 9903.03.15/.16 carve-outs.

5. Check who’s actually on the hook. Review purchase orders, supply agreements, Incoterms, and any tariff pass-through or price-adjustment clauses to determine whether you or your supplier absorbs the additional duty.

6. Get ahead on customs planning. Talk through bonded warehouse and FTZ strategy, entry timing, and sourcing alternatives with your compliance team now that CBP’s filing instructions are published.

Section 338 Background

This is a different legal mechanism than the Section 232 national security tariffs already in place on steel, aluminum, copper, and autos, and it’s also separate from the retaliatory tariffs Canada and the U.S. have exchanged since 2025. Section 338 lets the President impose duties of up to 50% when a trading partner is found to discriminate against U.S. commerce relative to how it treats other countries. This is the first major use of that authority in the current tariff cycle, and it matters because the legal basis, product scope, and exclusions are all different from what importers have dealt with under Section 232 or the earlier IEEPA actions.

How GHY Can Help?

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