Section 338 bans vs Section 232 tariffs: what’s the difference for Canada?

Updated Oct. 13, 2026

Section 232 tariffs are national-security duties Washington charges on steel, aluminum, autos, lumber and other sectors from every country, while Section 338 is a 1930 law aimed at one country accused of discriminating against U.S. commerce, and it now lets the White House tax some Canadian goods at 50 per cent and bar others outright. In practice, Section 232 sets the cost of entry for Canada’s biggest industrial exports, while Section 338 decides whether a narrower set of Canadian products can enter at all.

Section 338 is a provision of the U.S. Tariff Act of 1930 that lets the president impose new or additional duties of up to 50 per cent ad valorem on goods from a country found to discriminate against U.S. commerce, and to exclude that country’s goods from the United States if it maintains or increases the discrimination (19 U.S.C. 1338).

Key facts

• Section 338 of the Tariff Act of 1930 had never been used before President Donald Trump invoked it against Canada on July 20, 2026. Its 50 per cent duties took effect Aug. 22 and, since Sept. 15, cover about US$20.3 billion of 2025 U.S. imports from Canada on 659 tariff lines, Global Trade Alert estimates.
• Since Sept. 29, 68 tariff entries (53 for alcohol, 14 under the dairy order and one for motorcycles over 800 cc) have been barred from the United States. They cover up to US$0.97 billion of trade, or 0.25 per cent of Canada’s exports to the U.S.
• Section 232 of the Trade Expansion Act of 1962 currently brings tariffs of 15 to 50 per cent on steel, aluminum and copper goods, 25 per cent on autos, trucks and their parts, and 10 per cent on softwood lumber, Ottawa’s Trade Commissioner Service says.
• Since Sept. 15, Section 338 duties apply on top of Section 232 tariffs for everything except dairy products; about US$2.40 billion of Canadian goods now pays both.
• Section 338 has no exemption for goods that comply with the Canada-United States-Mexico Agreement (CUSMA). Under Section 232, CUSMA-compliant auto parts are currently spared and the U.S. content of compliant vehicles is not taxed.

What is Section 338 of the Tariff Act of 1930?

Washington turned to Section 338 months after the Supreme Court ruled on Feb. 20 that the International Emergency Economic Powers Act does not let a president impose tariffs, which ended the earlier emergency duties on Canada, Global Affairs Canada notes. On July 20, Trump signed three proclamations accusing Canada of discriminating against U.S. alcohol (provincial bans on American bottles), dairy (how Canada allocates its cheese import quotas) and autos (Canada’s motor vehicle tariffs). The duties were paused for three days in August, then took effect Aug. 22 after talks broke down on Aug. 21, according to the Sept. 8 alcohol proclamation.

Ottawa answered on Sept. 8 with counter-tariffs of 15, 25 or 50 per cent on U.S. goods, generally matching the U.S. rate on each product, the Trade Commissioner Service says. The same day, Trump signed five more proclamations. Two widened the Section 338 product lists from Sept. 15 and made those duties apply in addition to Section 232. Three barred certain Canadian alcohol, whey, molasses, non-alcoholic beer and large motorcycles from Sept. 29, with the alcohol order citing Saskatchewan’s new 50 per cent levy on U.S. alcohol. Serious Pick reported when the bans took effect.

Section 338 vs Section 232: side-by-side comparison

CUSMA and track record: Section 338 gives no CUSMA relief. Under Section 232 it varies: compliant auto parts are currently exempt, but there is no relief for lumber, kitchen cabinets or upholstered furniture. Section 232 steel and aluminum tariffs date to March 2018; Section 338 had never been invoked before this year and has never been tested in court.

The overlap matters more since Sept. 15. Until then, goods covered by Section 232 were exempt from Section 338. The September scope proclamations now say their duties “shall apply in addition to” Section 232 tariffs, and only the dairy list keeps the old exemption. Global Trade Alert counts newly added structural steel, aluminum and small vehicles worth US$1.09 billion of 2025 imports in the doubled-up group, along with electric control panels and wooden furniture.

Which Canadian industries are hit hardest?

Section 232 lands on Canada’s heavy industry. Since April 6, metal tariffs apply to a product’s full value rather than only its metal content, the Trade Commissioner Service says. Stelco, hit like other Canadian steelmakers by 50 per cent U.S. steel tariffs, plans up to 500 layoffs in Ontario. Softwood lumber pays the 10 per cent Section 232 tariff on top of long-standing U.S. anti-dumping and countervailing duties, Global Affairs Canada says.

Section 338 reaches a much wider mix of goods, from plastics, furniture, electronics and paper to textiles, industrial machinery and sports equipment, Ottawa says. The September changes added cheeses, paper products and iron and steel structural parts. Statistics Canada said the looming duties may have pulled shipments forward when Canada’s August trade surplus jumped to $4.2 billion.

The bans fall hardest on spirits. The U.S. imported US$673 million of Canadian spirits in 2025, compared with US$62.1 million of wine and US$19.2 million of beer, CBC News reported, citing U.S. Census Bureau data. Spirits Canada says about 93 per cent of Canada’s spirits exports go to the U.S. Some bulk alcohol is outside the ban, and bulk whisky and liqueurs over four litres were dropped from the 50 per cent list, which a KPMG Law trade lawyer told CBC spares large distillers with U.S. bottling plants more than small producers.

How much do the tariffs cost Canada?

The Section 338 package covers about 5.3 per cent of the US$383.1 billion of goods the U.S. imported from Canada in 2025, by Global Trade Alert’s count, and the September changes nudged Canada’s trade-weighted average U.S. tariff from 7.17 per cent to 7.50 per cent. The banned goods are a small slice of trade, but a tariff can be paid while a ban cannot: banned goods cannot lawfully enter at all, as Troutman Pepper Locke notes. Deloitte has cut its 2027 growth forecast for Canada as the tariff fight escalates.

Can Section 338 or Section 232 tariffs be lifted?

Section 338 can be switched off quickly. The statute says the president shall “suspend, revoke, supplement, or amend” a proclamation whenever the public interest requires, as the three-day pause in August showed. Washington’s condition is that Canada remove what it calls discrimination; Ottawa says its administration of CUSMA dairy quotas complies with its obligations. Each ban order also says that if a court strikes the ban down, the 50 per cent duty applies instead. The law has never been litigated: some lawyers argue later trade laws superseded it, the Associated Press reported, and as of late August no lawsuit had been filed.

Section 232 tariffs are tied to national-security findings and change by proclamation, and partners that struck deals with Washington have won lower rates. Under a June proclamation, the European Union, Japan, the United Kingdom and several others pay a combined 15 per cent on mobile industrial machinery through Dec. 31, 2027, while CUSMA-qualifying Canadian goods pay 25 per cent on their non-U.S. content, with a 15 per cent minimum. Washington has also traded tariff relief for concessions in its lists of possible tariff cuts with China.

What happens next for Canada?

No deal is in sight. U.S. Trade Representative Jamieson Greer said on Oct. 1 that “a handful of outstanding issues” are “quite difficult to resolve,” CBC News reported, while Prime Minister Mark Carney has said Canada “stands ready to negotiate in good faith.” On Oct. 8, Greer said the U.S. is “holding fast,” adding: “When the Canadians want to get to yes, obviously we’ll be there ready to talk,” The Globe and Mail reported. Separately, Section 232 tariffs on upholstered furniture are scheduled to rise to 30 per cent, and on kitchen cabinets and vanities to 50 per cent, on Jan. 1, 2027.

Bottom line

Section 232 is a global, sector-by-sector tariff that sets the cost of Canadian steel, aluminum, autos and lumber in the U.S. Section 338 is a Canada-only pressure tool that can stack on top of it and, for some goods, close the border completely. It can also be lifted quickly if the two governments settle their dispute over alcohol, dairy and autos.

Sources: Federal Register — Proclamation 11061 (alcohol ban); Federal Register — Proclamation 11062 (dairy ban); Federal Register — Proclamation 11063 (motorcycle ban); Federal Register — Proclamation 11065 (scope and stacking); Federal Register — Proclamation 11032 (Section 232 metals); 19 U.S.C. 1338 (Cornell LII); 19 U.S.C. 1862 (Cornell LII); Trade Commissioner Service — U.S. tariffs FAQ;

Sources (continued): Global Affairs Canada — Softwood lumber FAQ; Global Trade Alert; Troutman Pepper Locke; Associated Press via PBS News; CBC News (Sept. 29); CBC News (Oct. 1); The Globe and Mail (Oct. 8).

This article is general information and is not investment advice.