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A new round of U.S. tariffs on Canadian goods took effect on August 22, 2026, adding another layer to an increasingly complex trade relationship between the United States and Canada after negotiations between the two governments failed to reach an agreement.

The measures impose an additional 50 percent tariff on specified categories of Canadian imports under Section 338 of the Tariff Act of 1930. President Donald Trump initially signed three proclamations (Proclamations 11046, 11047, and 11048) on July 20 addressing what the Administration describes as discriminatory Canadian treatment of U.S. alcoholic beverages, dairy products, and motor vehicles. The duties were originally scheduled to take effect on August 19, but President Trump delayed implementation by three days while negotiations continued. They ultimately took effect at 12:01 a.m. Eastern Time on August 22.

Importantly, the measures do not impose a blanket 50 percent tariff on all Canadian goods. Each proclamation establishes an additional 50 percent duty on a specified list of Canadian tariff classifications. Those lists extend considerably beyond the three industries at the center of the dispute, while other Canadian products remain outside the new Section 338 actions. 

  • See the White House’s Fact Sheet on these new tariffs here 
  • See the official text of the August 18 proclamation delaying the tariffs here 

Why the Administration Imposed the Tariffs

The Administration invoked Section 338 of the Tariff Act of 1930, which authorizes the President, under specified circumstances, to impose additional duties of up to 50 percent to offset burdens or disadvantages on U.S. commerce resulting from discriminatory or unequal treatment by another country. 

The three July proclamations identify distinct Canadian policies that the Administration argues disadvantage U.S. exporters.

Alcoholic beverages. The Administration cites decisions by Canadian provinces and territories to halt or restrict purchases, distribution, or retail sales of U.S. alcoholic beverages while continuing to permit products from other countries. The White House reports that every Canadian province and territory had restricted U.S. alcohol, that only Alberta and Saskatchewan subsequently lifted their bans (in June 2025), and that Canadian imports of U.S. alcoholic beverages declined by approximately 81 percent (from roughly $718 million to $137 million) between March 2025 and February 2026, compared with the corresponding prior-year period. 

Dairy. The Administration objects to Canada’s administration of tariff-rate quotas for U.S. dairy products, including cheese, under the USMCA. The dairy proclamation argues that Canada’s eligibility criteria for the USMCA dairy quotas do not allow retailers to obtain and use quota, whereas its criteria under the Canada-European Union Comprehensive Economic and Trade Agreement do grant retailers access, giving European Union exporters more favorable treatment than U.S. exporters. 

Motor vehicles. The Administration also challenges Canada’s tariff treatment of vehicles imported from the United States. The motor-vehicle proclamation cites Canada’s 25 percent tariff treatment of certain U.S. vehicles, including a 25 percent tariff on the value of non-Canadian and non-Mexican content in certain USMCA-qualifying U.S. vehicles, as well as tariff-rate quotas tied to automakers. The White House reports that Canadian imports of U.S. motor vehicles fell by about 22 percent (from approximately $25.9 billion to $20.3 billion) from April 2025 through March 2026, compared with the same period a year earlier, while Canadian vehicle imports from several other countries increased. 

Based on those findings, President Trump determined that additional tariffs were warranted to offset what the Administration considers a burden or disadvantage to U.S. commerce.

A Three-Day Window for Negotiations

The Administration initially scheduled the duties to take effect on August 19. However, on August 18, President Trump issued another proclamation postponing all three measures until August 22.

Explaining the delay, President Trump said senior Administration officials reported that Canada had committed to addressing the disputed measures. The proclamation stated that the status of negotiations justified granting the two governments an additional three days before the tariffs took effect. 

The proclamation stated that Canada had committed to removing the disputed “discriminations or unreasonable and unequal impositions.”

However, Canada describes the final stage of the negotiations differently. In remarks on August 22, Prime Minister Mark Carney said Canada had been prepared to remove its remaining retaliatory tariffs on strategic sectors, particularly steel, aluminum, and automobiles, if the United States substantially reduced its corresponding tariffs. Carney also said Canada was willing to encourage provinces to return U.S. alcohol to store shelves and to take administrative measures to protect supply management without changing the system itself, U.S. quotas, or applicable tariffs.

According to Carney, the governments had made progress toward an agreement earlier in the week, but the U.S. position shifted during the final days of negotiations. He characterized the final U.S. terms as economically unacceptable and summarized Canada’s assessment, saying, “they asked too much and offered too little.” Carney subsequently directed Canada’s negotiators to return to Ottawa and suspended the negotiations. 

The two governments are presenting very different perspectives on the breakdown. The Administration’s public statements focus on eliminating what it considers discriminatory treatment of American exports and on restoring more reciprocal market access, and U.S. Trade Representative Jamieson Greer has said that Canada made last-minute demands that upset the pact. The Canadian government says it offered concessions in several of the disputed areas but concluded that the broader package sought by the United States would not provide sufficient economic benefit to Canada.

What the New Tariffs Actually Cover

Although the underlying disputes concern alcohol, dairy, and automobiles, the products selected for the additional tariffs are considerably broader.

The White House describes the covered goods as ranging “from wine to hockey sticks to cement.” The accompanying tariff schedules also include classifications for products in areas such as agriculture, forestry, paper, chemicals, plastics, textiles and apparel, machinery, electronics, furniture, sporting goods, and other manufactured products.

For businesses, this distinction is important. Whether a particular Canadian product is subject to the new duty depends on its classification under the Harmonized Tariff Schedule of the United States, not merely on whether it falls within the alcohol, dairy, or automotive industries that prompted the three proclamations.

USMCA eligibility does not, in itself, exempt a covered product from the Section 338 tariffs. The White House specifically states that the additional tariffs apply to covered goods regardless of whether they otherwise qualify as originating goods under USMCA. 

At the same time, the proclamations contain significant exclusions. According to the White House, the new Section 338 tariffs do not apply to energy, potash, products already subject to specified Section 232 tariffs, or certain other categories, such as fish and critical minerals. The proclamations and tariff notes also exclude certain civil aircraft and aircraft components, as well as other specified products. 

The 50 percent duty is an additional duty, not a replacement for a product’s ordinary tariff treatment. The tariff notes state that covered goods remain subject to their general rates of duty and, subject to specified exceptions, to other applicable duties and charges. Businesses importing covered Canadian products should therefore review both the relevant HTSUS classification and any other applicable tariff provisions. 

Each of the three tariff actions is tied to a specific area of alleged discriminatory treatment by Canada (alcoholic beverages, dairy, and motor vehicles). However, the products subject to the resulting tariffs are not limited to those industries. Rather, each Annex II, linked below, identifies a broader set of Canadian goods subject to the additional duties.

  • The White House’s Annex II identifying Canadian products subject to the tariff action related to alcoholic beverages can be downloaded here
  • The White House’s Annex II identifying Canadian products subject to the tariff action related to dairy can be downloaded here
  • The White House’s Annex II identifying Canadian products subject to the tariff action related to motor vehicles can be downloaded here

Canada Announces New Counter-Tariffs

Canada has announced it will respond with additional counter-tariffs. In his August 22 remarks, Carney said Canada would match the new U.S. tariffs “dollar for dollar.” He said the measures would target sectors including steel, dairy, appliances, agricultural equipment, pulp and paper, and electronics, and would also encompass products currently affected by U.S. Section 232 and Section 338 measures. The Prime Minister’s remarks on the suspended trade negotiations and the plan for reciprocal tariffs can be found here.

The Prime Minister said details would follow and that the new tariffs would take effect the Tuesday after Labor Day. The Department of Finance subsequently confirmed an effective date of September 8, 2026. Canada’s First Ministers issued a corresponding readout confirming the planned dollar-for-dollar counter-tariffs and the forthcoming implementation date, which can be viewed here. 

On August 25, the Department of Finance Canada released details. Canada will impose counter-tariffs on approximately C$27.6 billion in imports of U.S. goods, effective at 12:01 a.m. on September 8, 2026, with U.S. goods already in transit to Canada when the measures take effect exempt. Rather than a single rate, the measures apply tariffs of 15, 25, or 50 percent, aligned with the U.S. 

Section 338 or Section 232 rate that applies to the corresponding Canadian product. The list covers steel and aluminum products, dairy (including cheese and milk products), fish and seafood, appliances, furniture, clothing and apparel, cosmetics, smartphones and other electronics, pulp and paper, and agricultural equipment. 

The counter-tariffs apply only to goods eligible to be marked as goods of the United States under the USMCA/CUSMA marking rules. Canada’s existing counter-tariffs on U.S. autos remain in place, while certain steel and aluminum products previously subject to 25 percent counter-tariffs will face higher rates under the new measures. Exceptional relief remains available through Canada’s tariff-remission framework, and the Canada Border Services Agency will publish administrative details in a Customs Notice. Alongside the tariffs, the government announced approximately C$7.5 billion in new or expanded support for affected workers and businesses, including expanded Employment Insurance flexibilities and a Regional Tariff Response Initiative. 

  • Department of Finance Canada’s August 25 news release announcing the countermeasures and support measures is available here.
  • Canada’s complete list of U.S. products subject to counter-tariffs effective September 8, 2026 (tariff items, rates, and descriptions) is available here.
  • Canada’s list of U.S. products subject to the pre-existing counter-tariffs on steel, aluminum, and autos is available here. 

Canada’s response builds on countermeasures introduced earlier in the U.S.-Canada trade dispute. Canada initially imposed counter-tariffs affecting approximately C$95 billion in annual imports from the United States. Most of the broader measures were removed effective September 1, 2025, while counter-tariffs on approximately C$51.4 billion in annual imports of U.S. steel, aluminum, and automobiles remained in place. 

  • This Department of Finance briefing provides an overview of Canada’s trade relationship with the United States, including the scope of its existing counter-tariffs, tariff-remission measures, and anticipated tariff revenues. Click here to access.

Carney also acknowledged that Canada’s new response would carry domestic costs, noting that counter-tariffs can raise prices and reduce consumer choice. The Canadian government nevertheless characterized the measures as necessary to protect affected Canadian industries while the broader trade dispute continues. 

The United States Threatens a Further Increase on January 1, 2027

The dispute escalated on August 24, two days after the Section 338 tariffs took effect and one day before Canada published its countermeasure list. 

In a post on Truth Social, President Trump stated that on January 1, 2027, tariffs on all Canadian cars and trucks, “both large and small,” automotive parts, and steel would increase to 50 percent, adding, “Build in the U.S. and there are ZERO TARIFFS. Canada will be treated like a State no longer!” 

The statement followed Carney’s August 22 pledge to match the U.S. tariffs dollar for dollar, but it did not expressly condition the increase on Canada proceeding with its counter-tariffs or on the failure to reach a new agreement. As of this writing, the announcement has been made only via a social media post; no proclamation or other formal action implementing a January 1 increase has been published, so the legal basis, product scope, and treatment of USMCA-qualifying vehicles and parts remain unclear. 

Many Canadian steel articles already face a 50 percent Section 232 tariff, although rates vary for certain derivative products. The practical effect of the President’s statement on steel, vehicles, and automotive parts will depend on any formal implementing action. Companies with cross-border automotive supply chains should monitor for a formal proclamation and any modifications to the existing Section 232 automobile and parts measures.

What Comes Next

The latest measures further complicate a U.S.-Canada trading relationship that remains deeply integrated yet is now governed by several overlapping tariff regimes.

USMCA continues to provide tariff-free treatment for substantial volumes of trade, but companies may also need to consider the new Section 338 measures, existing Section 232 tariffs, Canadian countermeasures, and product-specific exclusions or remission provisions. In some cases, USMCA qualification alone will not be sufficient to avoid an additional tariff. 

In the near term, attention will likely focus on implementation of Canada’s counter-tariffs on September 8, whether the United States formalizes the threatened January 1, 2027, increase on vehicles, parts, and steel, whether either government modifies or grants relief from the new measures, whether bilateral negotiations resume, and how the dispute affects the broader U.S.-Canada trade relationship and the review of USMCA.

For companies with cross-border supply chains, carefully reviewing individual tariff classifications and applicable exclusions will become increasingly important as the two governments’ trade measures continue to evolve.

Complete List of Canadian Products Covered by the New Section 338 Tariffs

Because the application of the tariffs depends on a product’s HTSUS classification, the White House annexes provide the most precise and comprehensive list of Canadian products subject to the additional 50 percent duty.

Together, these three official annexes contain the exhaustive list of HTSUS classifications designated for the new Section 338 duties. Because some listed products may fall within exclusions established elsewhere in the proclamations or tariff notes, read the product lists together with the applicable exclusions.

Official U.S. Government Sources

Official Canadian Government Sources

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