Executive summary

On 20 July 2026, United States (US) President Donald Trump signed three proclamations imposing an additional 50% ad valorem tariff on certain Canada-origin goods, invoking Section 338 of the Tariff Act of 1930 (19 U.S.C. 1338) (Section 338) related to Canadian import measures affecting US motor vehicles, alcoholic beverages and dairy. The additional duties take effect at 12:01 a.m. Eastern Time on 19 August 2026 for goods entered for consumption, or withdrawn from warehouse for consumption, on or after that time.

Section 338 of the Tariff Act of 1930 authorizes the US President to declare additional duties of up to 50% ad valorem on imports from a foreign country upon a finding that the country discriminates against US commerce or applies an unreasonable charge, exaction, regulation or limitation that is not equally enforced on like articles of every foreign country. Any duty proclaimed under Section 338 may take effect no earlier than 30 days after the proclamation.

Scope of the proclamations

• Motor vehicles (Harmonized Tariff Schedule of the United States (HTSUS) heading 9903.03.14) — does not target Canadian passenger vehicles or auto parts, which remain subject to the Section 232 automotive tariffs and are therefore excluded from Section 338 stacking
• Instead, the proclamation applies to a broad list of other Canadian-origin goods designed to reach substantial import volumes.
• Alcoholic beverages (HTSUS heading 9903.03.12) — covers not only Canadian-origin alcoholic beverages but also a broader list of related consumer and industrial goods
• Beyond alcoholic beverages, Annex II also reaches: certain essential oils, including peppermint oil; wood and articles of wood, including densified wood, wood tableware and kitchenware, marquetry and inlaid wood articles, and certain wood articles including bamboo; basketwork and other articles of plaiting materials; pulp, paper, and paperboard products; and ice hockey and field hockey equipment.
• Dairy (HTSUS heading 9903.03.13) — targets Canadian-origin dairy and closely related products, principally under Chapter 4 of the HTSUS
• Covered categories include milk and cream in various concentrated and sweetened forms; whey and dairy products not elsewhere specified; and caseinates. Annex II also picks up certain adjacent inputs and substitutes, including lactose and sugar syrups, cane molasses, nonalcoholic malt beverages and certain animal-origin products
• Exclusions
• Categories not covered by the additional 50% Section 338 duty across the three actions include energy products, potash, fish and critical minerals. In addition, each proclamation carves out articles subject to Section 232 duties and articles (other than unmanned aircraft) covered by the World Trade Organization (WTO) Agreement on Trade in Civil Aircraft. United States-Mexico-Canada Agreement (USMCA) preferential treatment does not exempt covered merchandise; importers should confirm scope at the eight-digit HTSUS level against the operative Annexes rather than rely on prior USMCA-based duty-free treatment.

Administration and implementation

Each proclamation directs the Commissioner of US Customs and Border Protection, in consultation with the US Secretary of the Treasury, US Secretary of Commerce, and US Trade Representative, to issue implementing regulations, guidance and any additional HTSUS modifications necessary to effectuate the duties, including through Federal Register notice.

Actions to consider

Actions for businesses with cross-border US-Canada supply chains to consider depending on their specific situations, include the following:

• Identify exposure by mapping HTSUS classifications of Canadian-origin imports against Annexes of each proclamation to quantify the 50% Section 338 duty impact effective 19 August 2026.
• Assess stacking with existing duties (Section 301 and Most-Favored Nation rates), while confirming that goods already subject to Section 232 measures fall outside the Section 338 scope.
• Reassess USMCA planning, as the 50% duty applies to merchandise that would otherwise receive USMCA preferential treatment and the ongoing USMCA renegotiation may introduce further changes.
• Model pricing, contract and customs valuation impacts, including Incoterms allocation, related-party pricing, first-sale eligibility and potential approaches for reducing duty exposure.
• Monitor US Customs and Border Protection guidance and Federal Register notices modifying the HTSUS, technical corrections to the annexes and any subsequent presidential action that suspends, modifies or expands the Section 338 measures.