The world is used to American tariff news daily. A new target is chosen, a new reason is put forward, another legal authority is selected, and a new tariff is put in place, ostensibly to force concessions from a trading partner. But the new tariffs on Canada set a new record for lack of credibility. They invoke a zombie authority found in the notorious and discredited Smoot-Hawley Tariff Act of 1930, which deepened the Great Depression. The courts should reject these tariffs as patently illegal.
We have all seen this movie before.
First, it was the ill-fated tariffs under a declaration of emergency, which the Supreme Court held was not a tariff authority at all. Then it was to deal with a claimed balance of payments crisis, which the Court of International Trade found did not exist. The third try was retaliation against every country of any size, 60 of them, for tolerating forced labor imports into their markets, which is about to be tested in court.
Not to sound like the economics teacher in Ferris Bueller's class, but some history is in order. The antidiscrimination authority Section 338 in the Smoot-Hawley law was necessitated in large part by the British granting an "imperial preference" to its colonies. Yes, this tariff authority stems from so long ago that empires existed, when British colonists insisted on getting preferential access to the mother country's home market. The problem a century ago was not just the British, although theirs was the largest colonial preference system, but the French, the Dutch, the Portuguese, and the Japanese with newly acquired colonies in Korea and Taiwan. The United States also granted preferences for imports from the Philippines and Puerto Rico, its new colonies.
But by winning World War II, the United States triumphed as the world's most powerful economy. The old empires collapsed, and the imperial preferences were made to disappear.
A second reason for Section 338 of the Smoot-Hawley Tariff Act, and its predecessor in the Fordney-McCumber Tariff Act of 1922, was to discourage other nations from retaliating against the United States when it placed massive tariffs on the products of others, which in that era, it did. Section 338 was like a nuclear deterrent designed to provide leverage and forestall massive actions by others. It was not a statute for taking rifle shots but against across-the-board trade discrimination.
Why is a court likely to be skeptical of the resurrection of this zombie 1930 statute, now turned on the products of Canada? The Smoot-Hawley statutory language would be clearer if it restated its original purposes; it does not. It simply allows the president to act against foreign discrimination against US goods as compared with imports from other countries. It is therefore necessary to read the provision in the context of its time, the beginning of the last century, with the United States worried about foreign empires and massive tariff walls, not the kind of discrimination that might arise on a few products due to inclusion in a free trade agreement or in the case of another country acting selectively simply to defend itself against the United States violating its commitments.
Global commerce conditions today are much different than when Smoot-Hawley was enacted in 1930. Trade relations between the United States and Canada have been governed by mutually accepted agreements since the North American Free Trade Agreement (NAFTA) of the early 1990s and its successor negotiated by the first Trump administration, the United States-Mexico-Canada Agreement (USMCA). Under Smoot-Hawley, the Congress provided the means to ascertain when serious broad discrimination faced US producers. It authorized the International Trade Commission (ITC) to study and monitor alleged foreign discrimination. But under President Donald Trump in 2026, there was no resort to that agency, which is very good about keeping a watch on US trade. The last time the ITC did anything under this statute is cited in its 1943 Annual Report (according to Global Trade Alert).
Maybe there is some discriminatory Canadian treatment of some US products, but there is no imperial preference or other blanket discrimination of the kind that Section 338 was designed for. That imperial era disappeared a long time ago. Nothing remotely resembling that exists today, and certainly not by Canada. If there were problems warranting a response, this was the wrong statute for the administration to have chosen. Section 301 of the Trade Act of 1974 could have been invoked, for example. Section 301 is designed for acting against harms to US commerce if any are found, and if the foreign actions are deemed to be unreasonable. But those findings were not made, perhaps because there is a legal standard that must be applied to Section 301 actions. Under the Administrative Procedures Act, which is applicable to the office of the United States Trade Representative, any decision taken by that agency must not be arbitrary and capricious to be valid. Given US violations of its obligations, that would be a hard test to meet.
The courts should find that resorting to Section 338, a dead statute—an anachronism if ever there was one—is yet again the wrongful use of a trade law by this administration. There are other legal theories the court can consult as to why use of Section 338 is not appropriate. One is that Section 338 was effectively repealed by the enactment of Section 301 (see explanation by Philip Zelikow). Other trade experts detail additional arguments that this old statute is being misused (Harrell and Hillman). Apparently, it was simply something the administration could not resist trying.
Whatever the legal pretext that is chosen by the president and his officials, the fact is that at present the US tariff is whatever the president wishes it to be, which leaves the courts playing whack-a-mole, treating use of each claimed authority as sound—until it is found to be otherwise. New tariffs will continue to be applied and will proliferate, even if through use of individual Section 301 or Section 232 cases. They are already being planned.
One last point. We all too readily see the newest tariff as being against Canada, and certainly it does hurt Canadians. But it is Americans that have to pay the tariff to US Customs. They are the importers of record. With increased costs or even lack of availability of Canadian inputs, American production lines may shut down, while other American products may become less competitive.
With the latest tariff threat, Americans got more than an old movie. There are serious adverse economic consequences as well, for ourselves, for our friends.
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