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New tariffs took effect on an array of imports from Canada over the weekend after high-level negotiations to avert them fell apart in the final hours before a U.S.-imposed deadline. In addition to the 50% duties on products including cement, plywood and paper, levied under a previously unused trade law, the breakdown in talks also further heightens uncertainty for the future of the U.S.-Mexico-Canada Agreement (USMCA).
On July 20, President Donald Trump invoked Section 338 of the Tariff Act of 1930, also known as the Smoot-Hawley Tariff Act, for the first time in that law’s history. In ordering the duties on about $20 billion of Canadian exports, Trump cited tariffs Canada imposed on U.S. automobiles, as well as Canadian retaliation against U.S. alcohol. Canada had set these duties in response to broad tariffs on Canadian products Trump imposed in 2025.
The newest tariffs, which took effect at 12:01 a.m. Aug. 22, exempt Canadian energy, potash (a fertilizer component), fish, imports already subject to Section 232 tariffs (steel, aluminum, copper, lumber, timber, derivative products of those materials, auto parts), and critical minerals.
The imposition of these tariffs opens the possibility of a new approach the Trump administration may consider using with other countries. Unlike those under Section 122 of the Trade Act of 1974, which Trump used earlier this year, there is no time limit to these duties.
As with nearly all other tariffs Trump has imposed since returning to office last year, these latest are likely to be subject to legal opposition, so any judicial outcome could dictate how Section 338 is used in the future.
Unlike the U.S. tariffs imposed on Canadian products last year (and then invalidated by a February 2026 Supreme Court ruling), these duties apply to goods normally exempt under the USMCA, the update to the North American Free Trade Agreement that Trump pushed for and signed off on during his first term.
In a social media post on Aug. 18 just hours before the original midnight deadline, President Donald Trump announced that he was delaying for three days the implementation of the Section 338 tariffs, “based on the fact that Canada and the U.S.A., subject to the finalization of documents, have a DEAL!”
But despite intense negotiations that went all the way up to the new deadline, Canadian Prime Minister Mark Carney ended the talks and declared there would be no deal because the U.S. side had introduced last-minute terms that were “unfair, uneconomic, and called into question the reliability of any deal.”
“In short, they asked too much, and they offered too little,” Carney said Aug. 22 at a news conference in Ottawa.
U.S. Trade Representative Jamison Greer told The New York Times Aug. 22 that the talks had included a U.S. offer to reduce its tariffs on autos (currently 25% for non-USMCA imports), steel and aluminum (50%) and their derivatives, and to lift the 10% tariff on Canadian lumber imposed in October 2025.
“The United States was prepared to reduce the tariff on steel from 50% to 25% for the majority of steel Canada sent to the United States,” Greer said.
This same reduction would have applied to aluminum, he said. Steel would have been subject to a quota system under the U.S. offer, with 50% tariffs on those imports exceeding the quota. A similar system is in place under the USMCA for U.S. dairy exports to Canada, under which tariffs as high as 300% apply after a certain level of exports enter Canada tariff-free.
In announcing the suspension of negotiations, Carney said Canada would retaliate against the new tariffs “dollar-for-dollar” with new duties beginning Sept. 8 on U.S. imports of steel, dairy, appliances, agricultural equipment, pulp, paper and electronics. U.S. officials said Trump would be provided “options” for counterretaliation if that occurred.
“We don’t have new talks planned with the Canadians,” Greer told The New York Times.
On Aug. 24, Trump posted on social media that the U.S. would raise the tariff rate on Canadian imports of cars, trucks and auto parts to 50% beginning Jan. 1, 2027. (The president also included steel in his threat, but that tariff rate is already 50%.)
The new tariffs impact only about 5% of Canadian imports to the U.S. so are not likely to have a meaningful economic impact. However, the collapse of the negotiations, the rhetoric from both governments, and the new escalation of retaliatory action and threats adds further uncertainty to the future of the USMCA.
On July 1, the Trump administration formally put the USMCA into an annual review process rather than extending the current agreement for 16 years. (See our prior coverage.) Trump and senior administration officials have repeatedly said the U.S. could leave the USMCA, using a provision that allows any of the three parties to do so with six months’ notice.
In its stead they say they would pursue bilateral agreements with Mexico and Canada, with tariffs that could track along most-favored nation rates. This approach could increase long-term costs for businesses with supply chains that cross the Canadian or Mexican borders and could decrease U.S. export competitiveness.
Businesses should consider scenario planning for different outcomes, including heightened costs of imports from Canada and Mexico.
Bessent criticizes IEEPA tariff refunds
In remarks to the White House press corps on Aug. 20, Treasury Secretary Scott Bessent referred to the ongoing court-ordered refunds of certain tariffs as “corporate welfare” and said the refunds were a significant factor in the federal budget deficit being driven higher this year. He added that new tariffs being implemented under different authorities but at similar levels to those ruled illegal should ensure that 2026 tariff revenues approximate those initially collected in 2025.
“The Democrat [attorneys general] who filed the ridiculous lawsuit against this administration wanted the money to go back to the payer of record — so that is corporate welfare,” Bessent said in response to a question about one retailer’s refund, adding that “the American people had the money in the U.S. Treasury, and we were forced to give it back.”
Bessent was referring to the refunds required after the Supreme Court invalidated tariffs Trump imposed using the International Emergency Economic Powers Act (IEEPA) beginning in February 2025. The administration collected an estimated $166 billion in revenue under the IEEPA duties and, under a ruling by the U.S. Court of International Trade (CIT), owes interest in addition to refunds of the initial payments, bringing the total owed to more than $170 billion.
U.S. importers have received more than $100 billion in IEEPA refunds, according to an estimate by Customs and Border Protection in an Aug. 4 court filing. However, the administration has appealed the refund order at various points throughout the process. Most recently, initial arguments were held Aug. 3 in an appeal at the U.S. Court of Appeals for the Federal Circuit.
Twenty-five states have sued the Trump administration over its imposition of new duties on imports from more than 85 countries under Section 301 — among the new tariffs Bessent referred to last week. The suit, filed in the CIT on Aug. 3, challenges the administration’s assertion that the new tariffs are aimed at addressing unacceptable forced labor practices in other countries. Trump officials have publicly said the Section 301 tariffs were meant to replace the IEEPA tariffs.
Ground beef tariff relief
Trump announced on social media on Aug. 21 that the U.S. will allow up to 300,000 metric tons of ground beef to enter the U.S. for 90 days with no out-of-quota tariffs. The president added that this beef will be sold at 25% below current market prices, introducing the temporary price controls to “substantially lower the price of ground beef for working American families.”
A White House official told The New York Times that Trump will sign an executive order to temporarily remove the tariffs within the next two weeks and that, in exchange for the tariff relief, the president had secured a deal with foreign beef exporters to provide a 25% discount. However, no foreign exporters or source countries for the products have been named.
This is the second such relief order on ground beef this year, after the president signed an executive order in February allowing imports of an additional 80,000 metric tons from Argentina during 2026 without out-of-quota tariffs.
The move drew swift opposition from some in the president’s party.
One Republican lawmaker, Sen. Deb Fischer, R-Neb. — a rancher by trade and representative of a state where cattle outnumber humans by nearly 3 to 1 — said in a social media post Aug. 21, “I’m extremely disappointed by this decision from the White House. We all want lower grocery prices, but as I’ve said for months, we cannot do it at the expense of American producers. Flooding the market with foreign beef hurts our livestock industry and undermines the long-term solution: growing the U.S. cattle herd to meet demand.”
Sen. Tim Sheehy, R-Mont., similarly wrote on social media, “I’ve advised President Trump against this course of action for a year because American ranchers have been struggling against the packer monopoly for decades, and this will further harm them…”
GOP senators including Tom Cotton of Arkansas, Chuck Grassley of Iowa, Pete Ricketts of Nebraska, and Senate Majority Whip John Barrasso of Wyoming, all have made similar public statements distancing themselves from the president’s decision since the announcement.
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