U.S. Imposes 50% Section 338 Tariffs on Canadian Imports – Dairy, Alcoholic Beverages and Motor Vehicles
Published July 20, 2026
Key Points
- Trump signed three Section 338 proclamations on July 20, 2026, adding a 50% duty on specific Canadian dairy, alcohol, and motor vehicle goods.
- Takes effect August 19, 2026.
- Importers have roughly 30 days to prepare.
- USMCA origin does not exempt covered goods from this duty.
- Coverage extends beyond the headline sectors, including products like wine, hockey sticks, and cement.
- Energy, potash, Section 232 goods, and a few other categories are excluded.
- Action needed now: confirm whether your Canadian imports fall under any of the three annexes before the effective date.
On 
July 20, 2026, President Trump signed three separate proclamations under Section 338 of the Tariff Act of 1930, imposing an additional 50% ad valorem duty on specific Canadian goods in the dairy, alcoholic beverage, and motor vehicle sectors.
According to the White House Fact Sheet, which summarizes the three proclamations, the tariffs respond to what the administration identifies as discriminatory treatment of U.S. products by Canada.
Section 338 Tariff Changes At a Glance
- Rate: An additional 50% ad valorem duty, on top of any existing duties, taxes, fees, and charges.
- Effective date: 12:01 a.m. Eastern time on August 19, 2026, for goods entered for consumption or withdrawn from warehouse for consumption on or after that date. That’s 30 days from signing, which is the minimum notice period required under Section 338.
- USMCA does not provide relief. These tariffs apply regardless of whether a good qualifies for preferential treatment under USMCA.
- Three separate proclamations, three separate product lists. Each proclamation has its own Annex I and Annex II. Annex I sets out exceptions and other implementation details, while Annex II identifies the specific HTSUS classifications and Chapter 99 modifications covered. Products range across categories including wine, hockey sticks, and cement, in addition to the headline dairy, alcohol, and auto categories, so importers should not assume their goods are unaffected just because they don’t ship dairy, alcohol, or vehicles.
- Exemptions: The 50% duty does not apply to energy products, potash, goods already subject to Section 232 tariffs, aircraft covered under the WTO Agreement on Trade in Civil Aircraft, or certain other excluded goods such as fish and critical minerals.
- Foreign trade zones: Covered goods admitted to a U.S. FTZ on or after the effective date must be admitted under “privileged foreign status,” meaning the duty rate is locked in at time of admission rather than at withdrawal.
Sectors Targeted (Proclamations)
1. Dairy. The administration’s finding centers on Canada’s tariff-rate quota (TRQ) system for cheese. Canada allows EU retailers to access its CETA cheese TRQ, but excludes retailers from the equivalent USMCA cheese TRQ, a distinction the proclamation says disadvantages U.S. cheese exporters relative to their European counterparts even though Canada has trade agreements with both. Proclamation
2. Alcoholic beverages. Since March 2025, Canadian provinces and territories have restricted or halted the purchase, distribution, and retailing of U.S. alcohol. Ontario’s LCBO and Quebec’s SAQ pulled U.S. products from shelves and catalogues that month. Only Alberta and Saskatchewan have since reversed course, in June 2025. The proclamation cites an 81% drop in U.S. alcohol exports to Canada (from roughly $718 million to $137 million, March 2025 through February 2026 versus the prior year) while imports from countries like Chile, Japan, Argentina, Ireland, New Zealand, and Australia rose in the same window. Proclamation
3. Motor vehicles. Since April 2025, Canada has applied a 25% tariff on U.S. motor vehicles that don’t qualify for USMCA preferential treatment, and a 25% tariff on non-originating content for vehicles that do qualify, along with automaker-specific TRQs. The proclamation states Canada has reduced these quotas for companies that shifted production out of Canada. U.S. motor vehicle exports to Canada fell approximately 22% (from about $25.9 billion to $20.3 billion) over the year, while imports from Mexico, Japan, Korea, and Germany increased. Proclamation
Ambassador Greer’s Statement on the Section 338 Tariffs
Meanwhile, U.S. Trade Representative (USTR) Ambassador Jamieson Greer issued a statement following the proclamations.
“While the Administration continues to secure fair and reciprocal trade deals with our trading partners, Canada, unlike other partners and allies, continues to retaliate against the United States for its efforts to rebalance trade and protect U.S. industry in national-security sensitive sectors. Specifically, Canada has taken U.S. alcohol products off Canadian shelves, given better market access to dairy products from the European Union, and has put a cap on U.S. vehicle exports to Canada from companies reshoring to the United States. Today, President Trump took decisive action to hold Canada accountable for its retaliation and discrimination, delivering on his promise to correct trade imbalances and ensure fairness for American workers, farmers, and businesses.”
Recommended Actions for Importers
1. Screen every Canadian import against all three proclamations. Don’t rely on general product descriptions. Work through the actual HTSUS provisions and Chapter 99 instructions in Annex I and Annex II to each proclamation to confirm what’s actually in scope, since coverage extends well beyond the headline dairy, alcohol, and vehicle categories.
2. Model your landed-cost exposure now. Identify covered merchandise expected to be entered for consumption, or withdrawn from warehouse, on or after August 19, and layer the additional 50% duty on top of every other duty and fee that already applies.
3. Don’t count on USMCA to shield you. Covered goods remain subject to the Section 338 duty even when they qualify for USMCA preferential treatment. USMCA origin does not create an exemption here.
4. Revisit classification and origin with your broker. Confirm tariff classifications, bills of materials, and country-of-origin determinations are current and well documented, particularly for goods near the boundary of a covered provision.
5. Check who’s actually on the hook. Review purchase orders, supply agreements, Incoterms, and any tariff pass-through or price-adjustment clauses to determine whether you or your supplier absorbs the additional duty.
6. Get ahead on customs planning. Talk through bonded warehouse and FTZ strategy, entry timing, and sourcing alternatives with your compliance team while CBP implementation guidance is still developing.
Section 338 Background
This is a different legal mechanism than the Section 232 national security tariffs already in place on steel, aluminum, copper, and autos, and it’s also separate from the retaliatory tariffs Canada and the U.S. have exchanged since 2025. Section 338 lets the President impose duties of up to 50% when a trading partner is found to discriminate against U.S. commerce relative to how it treats other countries. This is the first major use of that authority in the current tariff cycle, and it matters because the legal basis, product scope, and exclusions are all different from what importers have dealt with under Section 232 or the earlier IEEPA actions.
How GHY Can Help?
GHY specializes in helping businesses navigate and reduce the impacts of tariffs through strategic solutions tailored to their needs. Our experts can audit your supply chain to identify inefficiencies, uncover cost-saving opportunities, and ensure compliance with evolving trade regulations. We also employ tariff engineering techniques to optimize product classification and sourcing strategies, minimizing duty exposure and maximizing profitability.
By partnering with GHY, your business gains access to the tools and expertise needed to streamline operations and stay competitive in a challenging trade environment.
Contact Us Today! Booking a Meeting, email consult@ghy.com, or call +1 (800) 667-0771.
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