Trump Imposes
50% Tariff on Canadian Motor Vehicle Imports Under Section 338
·
President
Donald Trump
issued a proclamation under Section
338 of the Tariff Act of 1930 imposing an additional 50% tariff on
certain Canadian products in response to Canada's alleged discrimination against
U.S. motor vehicle exports.
·
The U.S.
alleges that Canada imposes tariffs
and tariff-rate quotas (TRQs) only on U.S. motor vehicles, while
providing more favorable treatment to imports from other
countries.
·
Canada
is also accused of using TRQs
to encourage automakers to invest in Canada and reducing quota benefits
for companies that shifted production to the United States.
·
According
to the proclamation, U.S. motor
vehicle exports to Canada declined by approximately 22%, from US$25.9 billion to US$20.3 billion,
between April 2025 and March
2026.
·
During
the same period, Canadian imports of motor vehicles from Mexico, Japan, South Korea, and Germany
increased, replacing U.S. exports.
·
The U.S.
administration states that Canada's measures have harmed American manufacturers, workers, and investment,
justifying action under Section 338.
·
The proclamation
imposes an additional 50% ad
valorem duty on specified Canadian products to offset the alleged
trade disadvantage.
·
The new
tariff will take effect from
12:01 a.m. (Eastern Time) on 19 August 2026 and will apply in addition
to existing duties, subject to specified exemptions.
·
U.S. Customs
and Border Protection (CBP)
has been authorized to implement and administer the new tariff measures.
[ABS News Service/21.07.2026]
BY THE PRESIDENT
OF THE UNITED STATES OF AMERICA
A PROCLAMATION
1. Section 338 of
the Tariff Act of 1930 (19 U.S.C. 1338) (section 338) empowers the President to,
among other things, impose duties on imports of a foreign country to offset the
burden or disadvantage from a foreign country’s discrimination against or unequal
imposition on the commerce of the United States.
2. Canada, through
discrimination against or an unreasonable and unequal imposition on U.S. auto and
auto parts exports, burdens U.S. commerce but not the commerce of other countries
and disadvantages U.S. commerce compared to the commerce of other countries. Specifically,
Canada imposed a tariff system on only U.S. motor vehicles and treats the commerce
of foreign countries more favorably than commerce of the
United States with respect to motor vehicles, as defined in Canada’s United States
Surtax Order (Motor Vehicles 2025), SOR/2025-118. By denying to the commerce of
the United States the benefits afforded to like commerce from other countries, Canada
discriminates against U.S. commerce, disadvantaging the commerce of the United States
compared to the commerce of other countries. And Canada’s imposition on U.S. motor
vehicles is unreasonable, is not equally applied upon the like articles of every
foreign country, and places a burden on the commerce of the United States but not
on the commerce of other countries.
3. Since April 9,
2025, Canada has maintained a 25 percent tariff rate on imports of U.S. motor vehicles
that do not qualify for preferential, duty-free treatment under the United States-Mexico-Canada
Agreement (USMCA). For U.S. motor vehicles that do qualify for preferential, duty-free
treatment under the USMCA, Canada applies a 25 percent tariff rate on the value
of all goods that do not originate in Canada or Mexico used in the production of
the vehicle, up to 85 percent of the total value of the vehicle. In addition, Canada
maintains a tariff-rate quota (TRQ) on U.S. motor vehicles that qualify for preferential,
duty-free treatment under the USMCA. The TRQ for each automaker limits duty-free
access for the covered motor vehicles from that automaker up to certain annual quantities
(in-quota quantities) and applies the tariffs described above on products that exceed
the in-quota quantities. The TRQs are granted to induce companies to invest in production
in Canada, and Canada has announced that it reduced the TRQs for U.S. companies
that moved manufacturing from Canada to the United States. Canada does not publicly
disclose the company-specific, in-quota quantities, but it has published these new
tariff rates in Customs Notice 25-15: United States Surtax Order (Motor Vehicles
2025).
4. The United States,
U.S. businesses and workers, and U.S. commerce suffer from Canada’s discriminatory,
unequal, and unreasonable tariff scheme. Following the implementation of the tariff
scheme, U.S. exports of motor vehicles to Canada fell precipitously. Comparing the
period from April 2025 through March 2026 to the same period in 2024-2025, imports
of U.S. motor vehicles to Canada decreased by approximately 22 percent (from approximately
$25.9 billion to approximately $20.3 billion).
5. Canada only applies
the tariff scheme to U.S.-origin motor vehicles. The tariff scheme does not apply
to the motor vehicles of any other country. Indeed, exports of motor vehicles from
other countries to Canada have increased to meet the demand previously filled by
U.S. exports. For example, comparing the period from April 2025 through February
2026 to the same period in 2024-2025, Canadian imports of Mexican motor vehicles
increased by approximately 23.6 percent, and imports from Japan, Korea, and Germany
increased by rates ranging from approximately 10.1 percent to approximately 13.5
percent. In total, Canadian imports of motor vehicles from countries other than
the United States increased by approximately $2.85 billion over the same period,
with Mexico accounting for almost $2 billion of the increase.
6. Accordingly, pursuant
to section 338, I find as a fact that Canada is discriminating against the commerce
of the United States through Canada’s motor vehicle tariff scheme. I also find as
a fact that this discrimination places the commerce of the United States at a disadvantage
compared to the commerce of other countries. And I find as fact that Canada’s imposition
is unreasonable, is not equally enforced upon the like articles of every foreign
country, and places a burden on the commerce of the United States.
7. Further, I find
that imposing additional ad valorem duties on certain products of Canada
to address the burden or disadvantage from this discrimination or unequal and unreasonable
imposition is in the public interest, will serve the public interest, and is consistent
with the interests of the United States. When U.S. producers are unfairly denied
export opportunities by Canada’s motor vehicle tariffs and TRQs, they lose revenues
that support production in the United States, among other things. This suppresses
U.S. industrial output, as well as investment, and thereby undermines employment
and economic vitality in American communities. Imposing additional duties on certain
products of Canada will, among other things, expand opportunities for U.S. producers
to compete within the U.S. market, enhancing American production and bringing attendant
economic and societal benefits, and may spur Canada to remove the discrimination
against U.S. motor vehicles.
8. Accordingly, I
find that it is necessary and appropriate and in the public interest to impose an
additional ad valorem duty of 50 percent on certain products of Canada, as
identified in Annex II to this proclamation, effective as of 12:01 a.m. eastern
time on August 19, 2026. I determine that the additional ad valorem duties
imposed in this proclamation, as described below, will offset the burden or disadvantage
on U.S. commerce from Canada’s discrimination or unequal and unreasonable imposition.
In my judgment, the action in this proclamation is consistent with the public interest,
will serve the public interest, and is consistent with the interests of the United
States.
9. Section 338 authorizes
the President, if he determines it will serve the public interest, to offset any
burden or disadvantage placed on the commerce of the United States by an unequal
imposition or discrimination by a foreign country by specifying and declaring additional
duties not to exceed 50 percent ad valorem (or its equivalent) and not to
take effect earlier than 30 days after the President’s proclamation finding that
a foreign country imposes an unreasonable charge, exaction, regulation, or limitation
that is not equally enforced on the like articles of every foreign country, or discriminates
in fact against U.S. commerce in a way that places the commerce of the United States
at a disadvantage compared to the commerce of any foreign country. Section 338 also
authorizes the President to suspend, revoke, supplement, or amend any proclamation
under section 338 whenever the President deems that the public interests require
such action. Further, section 338 authorizes the President to exclude articles of
the foreign country if the foreign country maintains or increases the discrimination
against the commerce of the United States and the President deems the exclusion
to be consistent with the public interests and the interests of the United States.
10. Section 604 of
the Trade Act of 1974, as amended (19 U.S.C. 2483) (section 604), authorizes the
President to embody in the Harmonized Tariff Schedule of the United States (HTSUS)
the substance of statutes affecting import treatment, and actions thereunder, including
the removal, modification, continuance, or imposition of any rate of duty or other
import restriction.
NOW, THEREFORE, I,
DONALD J. TRUMP, President of the United States of America, by the authority vested
in me by the Constitution and the laws of the United States, including section 338;
section 301 of title 3, United States Code; and section 604, do hereby proclaim
as follows:
(1) Except as otherwise
provided in this proclamation, certain products of Canada, as set forth in Annex
II to this proclamation, imported into the United States shall be subject to an
additional ad valorem duty of 50 percent, effective for goods entered for
consumption, or withdrawn from warehouse for consumption, on or after 12:01 a.m.
eastern time on August 19, 2026.
(2) Except as otherwise
provided in this proclamation and in Annex I to this proclamation, the duties imposed
in this proclamation are in addition to any other duties, taxes, fees, exactions,
and charges applicable to such products. The duties imposed in this proclamation
shall not apply to articles subject to duties pursuant to section 232 of the Trade
Expansion Act of 1962, as amended (19 U.S.C. 1862), or articles, excluding unmanned
aircraft, subject to the World Trade Organization Agreement on Trade in Civil Aircraft.
(3) The HTSUS is
modified as provided in Annex II to this proclamation, effective with respect to
goods entered for consumption, or withdrawn from warehouse for consumption, on or
after 12:01 a.m. eastern time on August 19, 2026, and the modifications shall continue
in effect, unless this action is expressly reduced, modified, or terminated.
(4) Any product subject
to the duties imposed in this proclamation, except those eligible for admission
under “domestic status” as described in 19 CFR 146.43, that is subject to the duties
imposed in this proclamation and that is admitted into a United States foreign trade
zone on or after the effective date of this proclamation must be admitted as “privileged
foreign status” as described in 19 CFR 146.41, and will be subject upon entry for
consumption to any ad valorem rate of duty related to the classification
under the applicable HTSUS subheading.
(5) The head of each
executive department and agency (agency) is authorized to and shall take all appropriate
measures within the agency’s authority to implement this proclamation. The head
of each agency may, consistent with applicable law, including section 301 of title
3, United States Code, redelegate the authority to take such appropriate measures
within the agency.
(6) The Commissioner
of U.S. Customs and Border Protection (CBP), in consultation with the Secretary
of the Treasury, the Secretary of Commerce, and the United States Trade Representative,
is authorized to issue such rules, regulations, guidance, instructions, or determinations
as may be necessary to implement this proclamation and is authorized to take any
necessary measures to administer the duties imposed in this proclamation.
(7) The Commissioner
of CBP, in consultation with the Secretary of the Treasury, the Secretary of Commerce,
the United States Trade Representative, the Chairman of the United States International
Trade Commission, and any other senior official he deems appropriate, shall determine
whether any additional modifications to the HTSUS are necessary to effectuate this
proclamation and shall make such modifications to the HTSUS through notice in the
Federal Register, including any technical correction to the annexes to this
proclamation.
(8) For any rule
or regulation the Commissioner of CBP makes to implement
this proclamation, the Commissioner of CBP shall, to the extent required by law,
obtain the approval of the President or the United States Trade Representative.
The United States Trade Representative is delegated the President’s approval authority
in 19 U.S.C. 1338(h).
(9) Any provision
of previous proclamations and Executive Orders that is inconsistent with this proclamation
is superseded to the extent of such inconsistency. If any provision of this proclamation
or the application of any provision to any individual or circumstance is held to
be invalid, the remainder of this proclamation and the application of its provisions
to any other individuals or circumstances shall not be affected.
IN WITNESS WHEREOF,
I have hereunto set my hand this twentieth day of July, in the year of our Lord
two thousand twenty-six, and of the Independence of the United States of America
the two hundred and fifty-first.
DONALD J. TRUMP