Trump administration consults unused 1930s law for tariff playbook
Axios · LC · trust 39/100
The Trump administration keeps finding new ways to wage trade wars. As one novel tariff authority nears its expiration, it's testing another — threatening huge duties on Canadian goods under a never-before-used law.
Why it matters: The administration's willingness to test new trade authorities makes tariff policy harder for businesses, investors and foreign governments to handicap.
Driving the news: The White House says the tariffs respond to what it considers Canadian discrimination against U.S. autos, dairy and alcohol.
Between the lines: Section 338 is the latest legal authority the administration has reached for after courts earlier this year narrowed its emergency tariff powers .
What to watch: Trade lawyers suggest the latest Canadian tariffs are also likely to face legal scrutiny — that is, if they take effect.
The other side: A senior administration official argued Section 338's "terms are clear" and said Canada's retaliation and preferential treatment of third countries "fits squarely" within the statute.
The bottom line: "The toothpaste is out of the tube. ... We would not be surprised to see [Section] 338 wielded against others," TD Cowen's Chris Krueger wrote in a client note Monday night, adding that "338 is the new IEEPA."
Trump stopped short of targeting some of Canada's most strategically important exports, exempting autos, lumber, semiconductors, pharmaceuticals and aircraft products from the new duties.
The intrigue: That's consistent with an administration trying to maximize negotiating leverage while limiting economic blowback, at a time when American voters are angry about inflation and the Iran war is keeping energy prices elevated.
The 30-day delay before the tariffs take effect leaves room for an off-ramp. A senior White House official stressed they remain open to negotiations, while Canadian Prime Minister Mark Carney condemned the tariffs but likewise pledged to intensify talks before August.
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