50 percent tariff hike... Again...

Trump threatens 50 percent tariff hike on Canadian goods

The tariffs, which are scheduled to go into effect in one month, up the ante in North American trade negotiations.

By Daniel Desrochers, Zi-Ann Lum and Oliver Ward

President Donald Trump on Monday announced that he will impose a 50 percent tariff on some Canadian goods, ratcheting up the trade war between the two countries after months of political tension.

The administration took three actions using Section 338 of Tariff Act of 1930, a law never before used to impose tariffs, but which the administration says allows it to respond to discriminatory treatment of U.S. products.

The tariff hikes, which apply to a range of Canadian exports from wine and honey to textiles, fishing rods, jewelry and furniture, will not go into effect until Aug. 19. Unlike previous rounds of tariffs on Canada, products covered under the U.S.-Mexico-Canada Agreement, the North American trade pact Trump inked during his first term, will not be exempt.

The latest White House action comes as the Trump administration intensifies negotiations on updates to that pact, which entered into a review period at the beginning of July. The Trump administration has thus far kept Canada largely sidelined as it focuses on formal negotiations with Mexico to extend the agreement.

The White House has been particularly irked at Canada over its retaliation for Trump’s tariff hikes on imports of steel and aluminum, which include comparable Canadian duties as well as U.S. alcohol boycotts by many of Canada’s provinces.

“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,” USTR Jamieson Greer said in a statement.

The orders Trump signed Monday also complain about Canada’s supply management system that limits imports of U.S. dairy products and its move to cap U.S. vehicle exports from companies reshoring operations from Canada to the United States.

The Section 338 provision in the 1930 law allows the United States to impose tariffs of up to 50 percent without congressional involvement to target countries that “discriminate” in trade against Washington, but requires the U.S. to make a finding of discrimination.

The administration’s novel uses of the Section 338 statute are almost certain to face a legal challenge, according to Ryan Majerus, a partner at King and Spalding’s international trade practice.

“Section 338 is a discrimination provision and very broad in scope, but it’s never been used [for tariffs] and will be challenged in court,” he said in an email. “This seems geared toward gaining leverage in the USMCA negotiations currently underway between the U.S. and Mexico.”

The Trump administration continues to delay launching formal USMCA review talks with Canada, despite the fact that Ottawa has dropped its efforts to impose a digital service tax and halted a law that would have forced U.S. streaming giants to pay billions to Canadian television. While the U.S. pushed for both actions, Canadian Prime Minister Mark Carney said he paused the streaming law out of affordability concerns.

The news is expected to cast a shadow over a meeting of Canada’s premiers in Charlottetown, Prince Edward Island this week where the U.S. trade war is expected to be a major focal point of discussions.

It also comes against the backdrop of a third round of bilateral USMCA talks between the U.S. and Mexico that begin in Mexico City on Wednesday.

U.S. Ambassador to Canada Pete Hoekstra let slip on Monday that additional negotiating rounds between Washington and Mexico City have already been planned for August, citing “so much work that needs to be done” before any agreement can be signed.

“I’m not sure exactly how long that’s going to take, but they’re knocking down the issues with Mexico,” he said. “The discussions and negotiations with Canada are at a different point.”

Mexico and Canada had advocated for a renewal of the trilateral treaty to extend the current 2036 expiration to 2042. The U.S. rejected a 16-year renewal during a mandated joint review meeting earlier this month, arguing it first needs to address trade deficits with both countries.