The U.S.-Canada trading relationship experienced further deterioration on September 8, with Canadian counter-tariffs taking effect, targeting hundreds of U.S. goods in certain sectors, and a U.S. response including additional tariffs effective September 15 and prohibitions on the importation of certain Canadian alcoholic beverages, dairy products, and motorcycles, effective September 29.
These latest measures mark a significant escalation in the ongoing U.S.-Canada trade dispute, and notably, expand the Trump Administration’s use of Section 338 of the Tariff Act of 1930 (“Section 338”) beyond additional tariffs to outright import restrictions.
U.S. Section 338 Tariffs and Canada’s Retaliatory Tariffs Take Effect
On August 22, 2026, after a temporary 3-day suspension following stalled negotiations, the United States tariffs of up to 50 percent on approximately C$27.6 billion of Canadian imports, under the authority of Section 338 of the Tariff Act of 1930.
In response, the Government of Canada announced countermeasures on an equivalent value of U.S. imports. Effective September 8, the counter-tariffs apply on a “dollar for dollar” basis of 15, 25, and 50 percent on selected U.S.-origin products, with applicable rates generally corresponding to the U.S. tariff imposed on comparable Canadian goods. The counter-measures cover products in sectors including dairy, steel and aluminum, appliances, plastic, pulp and paper, agricultural equipment, and electronics.
United States Responds with Section 338 Import Restrictions and Tariff Stacking Rules
Hours after Canada’s countermeasures took effect, President Trump issued a series of presidential proclamations pursuant to his authority under Section 338. Three of the proclamations move beyond the tariffs initially imposed under Section 338 to an outright import ban on certain Canadian products, while two others modify the scope of Canadian products subject to the 50 percent tariffs.
The three import bans target Canadian alcoholic beverages, certain dairy products, and motorcycles and are scheduled to take effect on September 29, 2026. The Trump Administration tied each prohibition to conduct alleged to discriminate against U.S. commerce, as required by Section 338. With respect to alcoholic beverages, the Trump Administration pointed to Canadian provinces’ restrictions on the sale and distribution of U.S. alcoholic beverages. The dairy action responds to Canadian tariff-rate quotas affecting U.S. access to the Canadian dairy market, and the motorcycle action addresses Canadian measures affecting U.S. motor vehicle trade.
The import bans represent a significant escalation from the Trump Administration’s initial use of Section 338 in July. Section 338 authorizes the President to impose additional duties of up to 50 percent where the President determines that a foreign country discriminates against U.S. commerce or imposes unreasonable or unequal restrictions on U.S. products. The statute further provides that, where the foreign country maintains or increases the discrimination, the President may exclude products of that country from importation into the United States if the President determines that doing so is consistent with the public interest and the interests of the United States.
The September 8 actions invoke that latter authority. Following the entry into force of the Canadian retaliatory tariffs on September 8, the President determined that Canada had maintained or increased the discriminatory treatment underlying the earlier Section 338 actions and moved from the additional duties to import exclusion for the targeted product categories.
The remaining two September 8 proclamations modify the products subject to the existing 50 percent tariffs. Effective September 15, certain products, including cement, road salt, and certain hospital products, will be removed from the coverage of the Section 338 action. Other Canadian products, such as certain all-terrain vehicles, boats, and cheeses, will become subject to the 50 percent tariff.
In addition, the President removed the “anti-stacking” rule that applied to the various tariffs enacted pursuant to separate authorities. Specifically, the President stated that all Section 338 tariffs applied in addition to any Section 232 tariffs are applicable to these products.
According to the Trump Administration, these modifications are intended to maintain approximately the same overall value of Canadian trade subject to the initial Section 338 tariffs.
Canadian Products Targeted in Federal Procurement
Separately, President Trump directed the General Services Administration (“GSA”), in coordination with the United States Trade Representative, to begin removing Canadian-origin products from the GSA Multiple Award Schedule Program.
The Administration characterized the procurement action as a response to Canadian federal and provincial procurement policies that it says restrict access for U.S. businesses. The President indicated that the restrictions would remain in place unless Canada provides reciprocal access for U.S. suppliers.
Key Takeaways
The September 8 actions mark a significant escalation in U.S.-Canada trade tensions. Canada’s new counter-tariffs impose duties of up to 50 percent on approximately C$27.6 billion of U.S. goods, targeting products affected by U.S. Section 338 and Section 232 measures. In response, the United States has expanded its use of Section 338 beyond tariffs to outright import bans for certain Canadian products, while also modifying the scope of existing Section 338 duties and targeting Canadian access to U.S. federal procurement and adjusting the stacking rules. These measures indicate that unless negotiations restart, tit-for-tat import restrictions are likely to persist for the foreseeable future. Notably, neither Canada nor the United States have provided notice of withdrawal from the U.S.-Mexico-Canada Agreement (“USMCA” or “CUSMA”) pursuant to USMCA Article 34.6, which requires 6-month written notice of such withdrawal. Therefore, the USMCA still governs all trade between the countries with the exception of the above-mentioned measures.