# Trump Is Using a Trade Law Relic to Illegally Punish Canada 

A new lawsuit challenges the administration’s tariff war against an ally.

November 2, 2026 • Commentary 

By [Ilya Somin](https://www.cato.org/people/ilya-somin) 

This article appeared in [The Dispatch](https://thedispatch.com/article/trump-canada-tariffs-section-338-lawsuit/) on November 2, 2026.

Courts have already ruled against two avenues President Donald Trump used to impose his tariff regime. That hasn’t stopped his efforts to attempt to deploy obscure or outdated trade law provisions to justify new import levies.

His latest tool is the Smoot-Hawley Tariff Act of 1930, the notorious legislation that gravely exacerbated the Great Depression.

Section 338 of that law is the basis of Trump’s massive 50 percent tariffs on a variety of Canadian imports, including motor vehicles, furniture, dairy products, and more. On October 20, Gellert Global Group Corp., a major food importer and producer based in New Jersey, filed the first [lawsuit](https://libertyjusticecenter.org/wp-content/uploads/Gellert-v.-Trump-Compl.-2026.10.20.pdf) challenging those tariffs before the U.S. Court of International Trade, the federal court with jurisdiction over tariff cases.

Gellert, which imports Canadian cheese subject to the tariffs, is represented by the Liberty Justice Center, a public interest law firm I worked with on the case challenging the massive tariffs Trump imposed under the International Emergency Economic Powers Act (IEEPA). It resulted in the [tariffs’ invalidation in February](https://thedispatch.com/article/supreme-court-tariffs-emergency-powers/) by the Supreme Court, which not only ruled that IEEPA doesn’t authorize tariffs but also [emphasized that tariffs are a congressional power](https://www.cato.org/commentary/how-supreme-court-spared-america), and that the president does not have the power to “impose tariffs on imports from any country, of any product, at any rate, for any amount of time.” The Section 338 tariffs are a similar power grab.

They are illegal for multiple reasons, part of an ongoing effort by this administration to usurp Congress’ constitutional authority over tariffs. In addition, they harm the U.S. economy and poison relations with a key ally. [Section 338](https://www.law.cornell.edu/uscode/text/19/1338) of the 1930 Tariff Act has never been used by a president to enact tariffs before; Philip Zelikow, a conservative trade policy expert and former Bush administration official, [has shown](https://reason.com/volokh/2025/06/03/does-the-smoot-hawley-act-justify-the-trump-tariffs-no-says-philip-zelikow/) that Section 338 was superseded by legislation enacted in 1962 and 1974.

Even if Section 338 is still operative, Trump’s tariffs on Canadian goods violate its requirements. As the [complaint](https://libertyjusticecenter.org/wp-content/uploads/Gellert-v.-Trump-Compl.-2026.10.20.pdf) explains, the Canadian trade measures cited by Trump as justification for the new tariffs do not discriminate against U.S. goods; Section 338 can only be used against discriminatory policies. Some retaliate against previous tariffs imposed by Trump. Most do not actually treat U.S. goods less favorably than imports from many other countries. In addition, the Section 338 tariffs go well beyond “offsetting” Canadian measures, violating another requirement of the law. They impose the maximum 50 percent rate on all covered goods, even though the Canadian tariffs in question are lower and do not cover as wide a range of products. Some of the Canadian measures are not even import restrictions at all, but merely decisions by Canadian provincial governments to stop purchasing U.S. alcoholic beverages for their government-owned liquor stores. Consumer decisions to stop purchasing a given product are not discriminatory restrictions on trade. Otherwise, such “discrimination” would occur anytime a foreign government chooses to buy anything from a non-American producer when there are U.S. producers that sell similar products.

The administration’s interpretation of Section 338 also runs afoul of the major questions doctrine, which [requires Congress](https://www.law.cornell.edu/wex/major_questions_doctrine) to “speak clearly” when authorizing the executive to make decisions of “vast economic and political significance.” Under Trump’s approach, Section 338 can be used to impose 50 percent tariffs whenever a trading partner imposes any restrictions on U.S. goods, or simply chooses not to buy them. And the resulting tariffs need not be calibrated to those they are supposed to “offset.” This is a blank check to impose massive tariffs against almost any imports at any time—exactly the kind of power the Supreme Court, in its ruling on the IEEPA case, determined the executive cannot have. In that case, three of the six justices in the majority relied on the major questions doctrine. [And the Federal Circuit lower court decision](https://reason.com/volokh/2025/08/29/federal-circuit-rules-against-trumps-massive-ieepa-tariffs-in-our-case-challenging-them/) in the case also relied heavily on the major questions doctrine. That circuit has nationwide jurisdiction over tariff cases, and its precedent is binding.

If Section 338 is still valid and does grant the kind of nearly unlimited authority Trump claims, that would violate the constitutional “nondelegation” doctrine, which restricts delegation of legislative power to the executive. Last year’s Supreme Court [decision](https://reason.com/volokh/2025/06/27/a-flawed-but-encouraging-nondelegation-decision/) in *FCC v. Consumers’ Research* held that delegations of the power to impose taxes (including, presumably, tariffs) must have a clear “floor” and “ceiling” and that “\[t\]he guidance needed is greater when an agency action will affect the entire national economy than when it addresses a narrow, technical issue.” It also emphasized that even a clear ceiling is not enough if it is so high as to still leave the executive with effectively “boundless power.” A 50 percent tariff is high enough to devastate commerce in most imports, thus ensuring the power claimed by Trump has no meaningful constraint.

Section 338 also has [an import-ban provision](https://www.law.cornell.edu/uscode/text/19/1338), which Trump has [used to prohibit some Canadian imports entirely](https://reason.com/volokh/2026/09/09/trump-expands-illegal-section-338-tariffs-against-canadian-imports-and-bans-some-entirely/), such as Canadian beer and distilled spirits, along with molasses and motorcycles. Gellert doesn’t import products subject to the ban, so this action is not directly challenged in the lawsuit. But it, too, is illegal. Under Section 338, import bans can only be imposed to reinforce the initial Section 338 tariffs in cases where the trading partner in question persists in its discriminatory policies. If the initial Section 338 action was illegal, [the same goes for the follow-up ban](https://reason.com/volokh/2026/09/09/trump-expands-illegal-section-338-tariffs-against-canadian-imports-and-bans-some-entirely/). The import bans further exacerbate the major questions and nondelegation flaws in the administration’s interpretation of Section 338. Under its approach, the executive would not only have virtually unlimited power to impose up to 50 percent tariffs, but also a nearly unlimited power to ban imports outright. And import bans are also a congressional power, [subject to the same](https://www.lawfaremedia.org/article/the-president-doesn-t-have-unlimited-power-to-impose-import-bans) major questions and nondelegation constraints as tariffs.

The Section 338 tariffs are part of an ongoing series of import taxes Trump has instituted in the wake of the IEEPA decision, seeking to again usurp the unlimited tariff authority the Supreme Court denied him. He previously tried to use Section 122 and Section 301 of the Trade Act of 1974 to essentially replicate the IEEPA tariffs. In both cases, he sought [to transform a narrowly limited tariff authority](https://thedispatch.com/article/trump-tariffs-section-301-forced-labor/) into a blank check to impose massive tariffs at will. The Court of International Trade [invalidated the Section 122](https://reason.com/volokh/2026/05/07/us-court-of-international-trade-rules-against-trumps-section-122-tariffs/) tariffs in May (the case is on appeal), and the Section 301 tariffs (which impose tariffs ranging from 10 percent to 12.5 percent on 60 trading partners) [have also been challenged in court](https://thedispatch.com/article/trump-tariffs-section-301-forced-labor/). In addition to illegally usurping Congress’ authority under the Constitution, these tariff actions [raise prices for consumers](https://www.foxnews.com/politics/american-made-goods-expensive-under-trump-tariffs-new-research-finds), greatly [reduce economic growth](https://taxfoundation.org/research/federal-tax/trump-tariffs-trade-war/), would [impose some $700 billion in new taxes](https://taxfoundation.org/research/federal-tax/trump-tariffs-trade-war/) on Americans over a 10-year period, and have [failed to increase manufacturing employment](https://www.brookings.edu/articles/not-your-grandfathers-factory-why-tariffs-wont-help-midwest-manufacturing/), despite Trump’s claims that they would achieve that goal.

The tariffs against Canada—combined with Trump’s repeated [threats to make Canada the “51st state”](https://www.youtube.com/watch?v=uKTHy2Zauck)—have also poisoned U.S. relations with a key ally. The percentage of Canadians with a favorable view of the U.S. has [fallen from 54 percent in 2024 to only 33 percent this year](https://www.pewresearch.org/short-reads/2026/07/27/canadians-and-mexicans-now-view-china-more-positively-than-the-us/)—a worse rating than even China’s authoritarian regime. Canadians have stood with the U.S. in two world wars and the Cold War, and their troops fought side-by-side with ours in Afghanistan, [where more than 160 Canadians were killed](https://en.wikipedia.org/wiki/Canadian_Forces_casualties_in_Afghanistan). Canada is one of our biggest trading partners, and we benefit greatly from imports of Canadian food, energy, aluminum, and other products that it can produce better or more cheaply than we can. Canadian imports are vital inputs into the production of numerous U.S. businesses. Alienating a key ally and trading partner doesn’t make America “great again.” It makes us weaker, poorer, and more isolated.

Trump [recently rescinded](https://www.washingtonpost.com/politics/2026/10/23/trump-rolls-back-some-canada-tariffs-move-that-helps-gop-candidates/?utm_campaign=wp_the7-tracking-trump&utm_medium=email&utm_source=newsletter&utm_content=&utm_term=) some of the tariffs on Canadian goods, ostensibly to help congressional Republicans fearful of voter backlash in the upcoming midterm election. But most of the Section 338 tariffs and import bans remain in place, and even as he rescinded some tariffs, he [extended them for other products](https://qz.com/trump-canadian-tariffs-exemptions-section-338-collins-102326). Their imposition should never have been subject to one person’s whim in the first place. Such a concentration of arbitrary power over vast portions of the economy creates dangerous uncertainty and undermines the rule of law.

Courts should strike down the Section 338 tariffs, as they did with the IEEPA and Section 122 power grabs. And Americans in general should repudiate Trump’s actions and make clear we reject this ill-conceived trade war against a close ally.

##### About the Author 

[![ilya-somin-cropped.jpg](/sites/cato.org/files/styles/author_picture/public/2023-04/ilya-somin-cropped.jpg?itok=J1IxBVI7)](/people/ilya-somin) 

##### [Ilya Somin](/people/ilya-somin)

Professor of Law, George Mason University, and B. Kenneth Simon Chair in Constitutional Studies, Cato Institute

[ 

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