President Donald Trump has activated Section 338 of the Tariff Act for the first time, imposing a 50% additional tariff on certain Canadian products. With the 10% global tariff set to expire on July 24, a new Section 301 tariff is also expected to be announced soon, indicating a potential resurgence of the trade war initiated by Trump.
According to reports from Politico and other political outlets on July 20, Trump signed three proclamations imposing a 50% additional tariff on select Canadian goods under Section 338 of the Tariff Act of 1930. The new tariffs will apply to Canadian products such as wine, honey, textiles, fishing rods, jewelry, and furniture, taking effect on August 19. Unlike previous tariffs on Canada, products covered under the United States-Mexico-Canada Agreement (USMCA) will not be exempt.
This marks the first time Section 338 has been used to impose tariffs. This provision allows for tariffs of up to 50% on countries that discriminate against U.S. trade, without needing congressional approval, although the U.S. government must first confirm the discriminatory practices.
The Trump administration has criticized Canada for retaliating against U.S. tariffs on steel and aluminum and for restricting the sale of U.S. alcoholic beverages. Canada’s supply management system, which limits imports of U.S. dairy products, and caps on auto exports from companies that moved production facilities to the U.S. have also been labeled as unfair practices.
Jamieson Greer, the U.S. Trade Representative (USTR), stated, "Canada continues to retaliate against U.S. efforts to restore trade balance and protect national security-related industries, unlike other trading partners and allies."
This action comes amid ongoing negotiations to amend the USMCA. Ryan Majerus, a partner at the international trade law firm King & Spalding, noted that this appears to be a move to gain leverage in the current USMCA negotiations between the U.S. and Mexico. Canadian Prime Minister Mark Carney issued a statement indicating that Canada would actively engage in discussions with the U.S. to resolve these issues.
However, the imposition of new tariffs raises the possibility of reigniting the trade war. CNN reported that "Trump's new 50% tariff on Canada poses a risk of triggering a new trade conflict."
Section 301 Tariffs Expected Soon
Meanwhile, the Trump administration is expected to restructure the global tariff system. Following a February ruling by the Supreme Court that deemed reciprocal tariffs based on the International Emergency Economic Powers Act (IEEPA) illegal, the 10% global tariff imposed under Trade Act Section 122 is set to expire on July 24. Tariffs under Section 122 can only be maintained for a maximum of 150 days without congressional approval.
The administration is anticipated to replace this with tariffs under Section 301 of the Trade Act, which allows for tariffs in response to unfair or discriminatory foreign government policies and practices. The USTR has been pursuing Section 301 procedures based on forced labor and structural overproduction. A total of 16 entities have been identified for overproduction, and 60 for forced labor, with South Korea included in both categories.
Regarding forced labor, a proposal has been made to impose a 12.5% tariff on certain countries, including South Korea. With public hearings already concluded, the USTR may announce a final plan as early as this week to coincide with the expiration of the global tariff. Specific proposals for overproduction tariffs have yet to be detailed, and it is unlikely that any decisions will be finalized before July 24 due to the need for public comment and hearings.
For South Korea, the key issue is whether the 15% tariff cap established in the U.S.-Korea trade agreement will be maintained. If the 12.5% forced labor tariff is combined with overproduction tariffs, the total rate could exceed 15%. Last July, South Korea and the U.S. agreed to lower the tariff rate on South Korean products from 25% to 15% in exchange for South Korea's $350 billion investment in the U.S. Greer has indicated that the administration intends to respect the tariff cap, but how the final rates will be adjusted remains uncertain.
Additionally, on the same day, President Trump signed a proclamation reducing import tariffs by half for companies investing in primary aluminum production facilities in the U.S. Companies approved by the Department of Commerce will only pay a 25% tariff on import volumes corresponding to their expected annual production from new facilities, down from the current 50%.
* This article has been translated by AI.
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