Trump pivot to Section 338 for tariffs poses problems for economy, separation of powers

Citing Section 338 of the 1930 Smoot-Hawley Tariff Act, President Donald Trump on July 20 announced steep 50 percent tariffs on Canadian goods, accusing Canada of discriminating against American autos, alcohol, and dairy products. CEI experts believe this novel action will present problems for the American economy and wrongly empower the executive branch on trade policies.

Steve Swedberg, CEI policy analyst:

“If this long-dormant law becomes an all-purpose tariff tool for the executive branch to wield, it will make it easier for future presidents to impose new import taxes without further action from Congress.

“Americans would ultimately pay the price through higher consumer prices, increased production costs for American businesses, and fewer job opportunities across the nation.

“Section 338 is an obscure, rarely discussed provision of the Smoot-Hawley Tariff Act of 1930 that authorizes tariffs in response to discrimination against US commerce. Although it remained on the books for nearly a century, presidents of both parties left that authority on the shelf while relying on other trade laws instead.

“Only after judicial setbacks of some of the Trump administration’s preferred tariff authorities has Section 338 suddenly become the latest vehicle for new tariffs.”

Ryan Young, CEI senior economist:

“The Trump administration is reviving the Great Depression-era tariff bill to enact new tariffs against Canada.

“The President’s weekend remarks about enacting new tariffs in response to recent Canadian wildfires is probably not the true reason for the tariffs. It more likely has to do with gaining leverage in renegotiating the USMCA trade agreement with Canada and Mexico, though the administration’s goals are unclear.

“The game of legal whack-a-mole has entered a new phase. While courts have struck down two of Trump’s tariff-making statutes, several others remain, possibly including these new Smoot-Hawley tariffs.”