Negotiations between the United States and Canada broke down late on August 21, 2026, and additional ad valorem duties of 50% on certain Canadian goods took effect at 12:01 a.m. eastern time on August 22. The duties were imposed under Section 338 of the Tariff Act of 1930 (19 U.S.C. 1338) by three proclamations signed July 20, 2026 — Proclamations 11046, 11047, and 11048 — addressing Canadian treatment of U.S. alcoholic beverages, dairy, and motor vehicles.

This is the first time Section 338 has been used to impose tariffs. Proclamation 11056 had suspended the duties, originally scheduled to take effect August 19, while the two governments worked toward a broader agreement; no agreement was reached before the suspension lapsed.

Breakdown of the negotiations

Over the last few weeks, Canada-U.S. Trade Minister Dominic LeBlanc and Canada's chief negotiator, Janice Charette, had met repeatedly with U.S. Trade Representative Jamieson Greer, with discussions covering the Section 338 measures as well as relief from Section 232 tariffs on steel, aluminum, autos, and lumber. President Trump said on August 18 that the parties had reached a deal "subject to the finalization of documents."

Shortly after the deadline passed, USTR released a statement from Ambassador Greer on its X account: "Tonight, Canada declined to finalize the trade deal under the terms agreed earlier this week. Despite the U.S. offer to Canada to receive the best treatment of any major exporter to our market, new demands and walk backs of other commitments by Canada have upended the careful balance reached in the past days." According to USTR, the offer would have included significant tariff reductions on steel, aluminum, autos, and lumber, a broader economic and national security partnership, and the opening of formal negotiations on the U.S.-Mexico-Canada Agreement (USMCA).

Minutes before the deadline, Prime Minister Mark Carney announced that he "decided to suspend trade negotiations with the U.S. and have directed Canada's negotiators to return to Ottawa," stating that "last-minute changes in the U.S. proposed terms were unfair, uneconomic, and called into question the reliability of any deal." He said Canada would match the US tariffs "dollar for dollar" to protect Canadian workers and businesses. In remarks on August 22, Carney said the retaliatory measures would come into force on September 8 — the Tuesday after Labor Day — and would target sectors including steel, dairy, appliances, agricultural equipment, pulp and paper, and electronics. Canada has not yet released the detailed product list or tariff schedule, but Carney said those details would be published in the coming days.

Scope of the tariffs

The proclamations apply the additional 50% duty to approximately $20 billion of Canadian goods, with covered products identified in the annexes to each proclamation. Although the actions are framed around alcoholic beverages, dairy, and motor vehicles, the annexes reach well beyond those categories to include cosmetics, honey, seeds, paper and wood products, cement, textiles and apparel, furniture, jewelry, machinery, and sporting goods. Two features are significant: the duties apply regardless of whether goods qualify for preferential treatment under the USMCA, and they stack on top of other applicable duties, taxes, and fees, including antidumping and countervailing duties. According to the White House, the tariffs "will not apply to energy, potash, products subject to tariffs under Section 232 [of the Trade Expansion Act of 1962], and certain other goods, such as fish or critical minerals." The proclamations contain no fixed expiration date.

CBP implementing guidance

U.S. Customs and Border Protection (CBP) has issued CSMS #69606660, "GUIDANCE: Section 338 Additional Duties on Certain Goods of Canada," which provides implementing instructions for importers, brokers, and filers and identifies the Harmonized Tariff Schedule provisions subject to the duties.