President Donald Trump has found a new legal weapon to punish countries at will: Section 338 of the Smoot-Hawley Tariff Act of 1930, a statute that once choked global trade and deepened the Great Depression. This move comes after the Supreme Court struck down his previous tariffs based on the International Economic Emergency Powers Act (IEEPA) in February, forcing his administration to search for alternative legal justifications.
Section 338: A Dangerous Precedent
On the Monday before the worldwide forced-labor tariffs took effect, Trump imposed a 50% tariff on imports from Canada, invoking Section 338. The White House cited Canadian discrimination against American dairy, booze, and cars—retaliation for Trump's earlier tariffs—but observers note other motives, including threats to punish Canada for forest-fire smoke drifting into the US, leverage in USMCA talks, or even ambitions to make Canada the 51st state.
Section 338 grants the president authority to retaliate against any country that puts the United States "at a disadvantage compared with the commerce of any foreign country." Once the president determines this, he can impose duties as he sees fit. Until now, this section was never used to impose tariffs; it was leverage for most-favored-nation treatment. Trump's expansive interpretation could give him unchecked power to tariff any nation under vague pretenses.
Legal Challenges Ahead
Trump's forced-labor tariffs, imposed under Section 301 of the Trade Act of 1974, are also controversial. They target all trading partners, alleging forced labor, but legal experts argue this blanket accusation is unlikely to survive court scrutiny, as it may be deemed "arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with law."
The Supreme Court's February ruling against IEEPA tariffs was close, with a 6-3 majority, including two Trump appointees. The court showed deference to the president but objected to his use of the statute to impose taxes, which are Congress's preserve. Since then, Trump has tried other legal avenues, including Section 122 of the 1974 Trade Act for balance-of-payments crises—a rationale his own lawyers earlier dismissed—and Section 232 for national security tariffs on steel, aluminum, and autos.
Historical Context and Risks
Smoot-Hawley is infamous for raising US tariffs in 1930, prompting global retaliation and worsening the Great Depression. Section 338's vague language—allowing tariffs if the US is "at a disadvantage"—gives Trump broad discretion, potentially leading to a trade war that disrupts global supply chains and economic stability.
Eduardo Porter, an economics journalist, warns that Trump is determined to pursue his trade war, and with such a sprawling mandate, he may be difficult to stop. America's trading partners were initially relieved by the Supreme Court ruling, but Trump's new tactics have renewed concerns.
What's Next?
Legal challenges are likely, but the outcome is uncertain. The Supreme Court has shown deference to presidential authority in trade matters, and Section 338 has never been tested in court. If upheld, Trump could impose tariffs on any country at will, reshaping global trade relations.
The international community watches closely as Trump's trade policies threaten to upend decades of multilateral trade rules. With the USMCA renewal talks approaching, Canada's 50% tariff could be a bargaining chip, but the broader implications for global commerce are profound.
