Trump invokes Depression-era Smoot-Hawley Act to tariff Canadian autos
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President Trump invoked a never-used provision of the 1930 Smoot-Hawley Tariff Act to impose new tariffs on Canadian auto imports on July 20. The administration claims Canada’s 25% tariff on U.S. autos caused a 22% drop in American exports, but trade data and economic indicators point to other factors.
Section 338 Invocation
Trump on July 20 issued a proclamation imposing tariffs under Section 338 of the Smoot-Hawley Tariff Act of 1930, a provision never before used. The administration argues Canada’s 25% tariff on U.S. autos and auto parts, enacted in retaliation after Trump’s April 2025 “Liberation Day” tariffs, unfairly discriminates against American commerce. Section 338 was originally designed to counteract foreign discrimination by allowing the president to raise tariffs on countries that impose discriminatory measures on U.S. goods.
Trade Data Dispute
The proclamation cites a $5 billion, or 22%, drop in Canadian imports of U.S. autos to justify the tariffs. Data shows imports from Mexico, Japan, Korea, and Germany rose by nearly $3 billion over the same period. However, U.S. auto imports to Canada historically far exceed those from other countries, and recent fluctuations show a rebound in early 2026 followed by a decline, with levels near those of April 2025. Analysts point to a broad 1% decline in Canadian new car sales in 2026, with General Motors and Ford leading sales, and a Toyota Canada survey showing 56% of Canadians delaying major purchases due to affordability concerns.
What's Next
The tariffs are set to take effect immediately, adding costs to Canadian auto imports. Whether Canada will retaliate further or challenge the U.S. action remains unclear, as trade experts warn the move could escalate tensions between the two neighbors.
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Trump invokes Depression-era Smoot-Hawley Act to tariff Canadian autos
