Yesterday, President Donald Trump announced steep 50 percent duties on a broad array of Canadian imports after talks with Ottawa collapsed, driven largely by the administration’s push to preserve the earlier 50% levies on Canadian aluminum and other goods. Section 338 belonged to the infamous Smoot-Hawley Tariff Act of 1930, a measure widely blamed for making the Great Depression worse. In an earlier piece, I outlined why tariffs grounded in Section 338 constitute an unlawful seizure of legislative power by the executive branch. As Philip Zelikow of the Hoover Institution explained in a guest contribution to this VC blog, last year Section 338 was superseded by new statutes enacted in 1962 and 1974, rendering it defunct. Consequently, it has not been employed to impose tariffs since at least the 1940s. In a newer guest post, Georgetown University trade law scholar Peter Harrell argued that the proposed Canada tariffs are illegal even if Section 338 is no longer in effect. Trump’s measures fail to meet several prerequisites required to invoke the statute. I anticipate legal challenges to these tariffs, and I expect they should prevail.
This episode marks another instance in a pattern of attempts by Trump to override Congress’s tariff authority and otherwise impose harmful and destabilizing trade restrictions that harm the U.S. economy and strain relationships with key allies and trading partners, among whom Canada is one of the most important. These appropriations include the International Emergency Economic Powers Act (IEEPA) tariffs struck down by the Supreme Court in February in a case I helped pursue, the Section 122 tariffs invalidated by the U.S. Court of International Trade in April (the case is on appeal), and his expansive new Section 301 tariffs, justified under a dubious pretext of countering “forced labor.” Courts should continue to strike down these power grabs. And, as I argued in my recent Dispatch piece on Section 301 tariffs, they must learn from past missteps and resist staying injunctions that block illegal tariffs: Judges can mitigate the damage caused by illegal tariffs if they refuse to stay initial rulings blocking them. The Federal Circuit’s stay of the initial ruling against the IEEPA tariffs allowed the Trump administration to collect roughly $166 billion in unlawful tariff receipts, substantially amplifying the harm produced by the policy. A large portion of the harm caused by illegal tariffs—including lost sales, stunted investment, and higher prices for consumers—cannot be remedied by later refunds. Nor can the damage to the U.S. economy be undone. And, as the IEEPA episode demonstrates, even refunds are not guaranteed. Billions remained unpaid five months after the Supreme Court’s decision, and the Trump administration is attempting to avoid returning some of the money.
Acting swiftly to block illegal tariffs can also help limit the blow to the United States’ credibility and its standing with trading partners. Moreover, Trump’s misbegotten trade clash with Canada has soured relations with one of America’s closest and most significant allies, turning traditionally favorable Canadian public opinion against the United States. Ruining our economy and weakening our alliances isn’t what “Making America Great Again” stands for. The opposite is true. The principal beneficiaries of this trade conflict are likely to be America’s adversaries, including China, Russia, and Iran.
