Is the Supreme Court Going to Let Trump’s New Trade War Fly?

This is Executive Dysfunction, a newsletter that highlights one under-the-radar story about how Trump is changing the law—or how the law is pushing back—and keeps you posted on the latest from Slate’s Jurisprudence team. Click here to receive it in your inbox each week.President Donald Trump is back at it with tariffs, announcing over the weekend that the U.S. is imposing a 50 percent tariff on $20 billion worth of Canadian goods ranging from hockey sticks to feathers to building materials. And he’s threatening even more tariffs on Canada’s auto industry come Jan. 1, 2027, claiming that the U.S. has been “carrying” Canada for decades and that our northern neighbors have been ripping Americans off. Just six months ago, the Supreme Court rejected Trump’s 2025 firestorm of tariffs, but now the administration thinks it has identified a new way to try to execute the president’s agenda. In this latest Canada fight, the Trump administration is dusting off a section of trade law that has never actually been used to tariff before. If it sticks, it could immediately allow the president to tariff just about anyone in the world with few guardrails.The administration has discovered the Tariff Act of 1930, and within it, Section 338, a little-known statute that allows the president to impose duties of up to 50 percent on any foreign country he finds has discriminated against the U.S., either directly or indirectly. No U.S. president has ever used it to tariff another country until now, so Trump’s application of it new and uncharted legal territory. Marc Busch is worried, as a former adviser to the U.S. Department of Commerce and the U.S. Trade representative. He believes that this new approach faces better legal odds than the tariffs Trump attempted to enact through the International Emergency Economic Powers Act that the Supreme Court shot down last term.AdvertisementAdvertisement”What Trump may discover, and Canada might just turn out to be the beta test, is that he has the most latitude with Section 338, because it just says ‘discrimination.’ It clearly says ‘tariff.’ It clearly says he doesn’t need to really consult widely. There may or may not be a role for the International Trade Commission,” Busch, the Karl F. Landegger Professor of International Business Diplomacy at Georgetown University, told me. “That’s why the world is going to pay really close attention to the 338s, because this may be the only way he gets closer to the degree of freedom he had under IEEPA.”You may remember that initially Trump tried to implement his “Liberation Day” tariff agenda through IEEPA, targeting Canada and over 65 other countries and the European Union. Those tariffs faced an onslaught of lawsuits, and by February 2026, the Supreme Court intervened and ruled that the president could not use the act to unilaterally tariff, as that particular law makes no mention of tariffs, duties, taxes, or anything else that would suggest Congress wanted to give the executive tariff power. To date, the Trump administration has refunded about $100 billion to American businesses because of that decision (though consumers have yet to see any of that money).The president did not simply abandon his tariff agenda, though, instead identifying new ways to tariff under existing federal trade law. In February, Trump claimed that the U.S. was facing “fundamental international payment problems” that were, among other things, endangering the country’s ability to finance its spending. He used Section 122 of the Trade Act of 1974 to impose a temporary 10 percent tariff on “all countries.” A lawsuit was quickly filed, and within a few months the U.S. Court of International Trade shot down the administration’s use of Section 122.By July, Trump officials identified a new avenue, this time through Section 301 of the Trade Act of 1974. That allowed the president to tariff 60 countries “for their failure to impose and effectively enforce a prohibition on the importation of goods produced with forced labor.” Section 301 allows a president to tariff as a targeted economic diplomacy measure to induce a foreign government to abandon a particular practice. Again a lawsuit was filed challenging this use of Section 301, alleging that the Trump administration never conducted an investigation to determine if U.S. trading partners were in fact engaging in forced labor. The Supreme Court declined to hear the case, leaving the tariffs in place.AdvertisementAdvertisementThat brings us to the present day, where the administration is targeting Canada through Section 338 of the Tariff Act of 1930. The two countries have been waging a trade war since last year, when Trump first tried to use IEEPA to impose a 25 percent tariff on certain Canadian products, claiming that Canada had failed to stop the flow of fentanyl across the two countries’ shared border. Canada was one of the few countries to push back on tariffs, imposing retaliatory tariffs on U.S. goods that included everything from whiskey to aluminum and steel, and the two countries have been going at it ever since. Upping the ante was the fact that the U.S.–Mexico–Canada trade agreement—which Trump negotiated in his first term—was coming due this year, but last month the U.S. declined to renew it.Trump is leveraging Section 338 by arguing two main things. First, he’s claiming that Canada discriminated against the U.S. when it imposed its initial retaliatory tariffs. Busch believes that this is simply Trump being petty. “Section 338 got dusted off and used to take a swipe at Canada because the president has a particular grudge against Canada and China for having retaliated for his earlier tariffs and needs to make a demonstration effect come across as a result of this action,” he said. Given the U.S. manufacturing industry’s heavy reliance on China, Canada became the target to mollify Trump.The second argument behind Section 338 has to do with cheese. The Trump administration says Canada awarded the EU a better trade quota for its cheese than it offered the U.S., and that is also proof of discrimination. This battle over cheese does not pass the smell test for Busch, who argues the U.S. also gives preferential treatment to countries it establishes trade deals with—including Canada.”The U.S. also has preferential market access to the Canadian market through the U.S.–Mexico–Canada trade pact. So it’s a little odd to enjoy preferential market access under USMC, but call what Europe has discrimination,” Busch explained.AdvertisementAdvertisementLawsuits challenging the Trump administration’s use of Section 338 are likely to drop soon. “We’re just waiting for someone who imported a hockey stick,” Busch said. But it’s anyone’s guess how America’s courts will decide on them. Remember, this statute has never been used to tariff, and it doesn’t spend much time defining discrimination, the keyword that’s enabling Trump to try to tariff a longtime American ally into economic oblivion. One law firm partner told the New York Times, “It’s hard to assess how vulnerable a Section 338 challenge would be, simply because there’s no record of any judicial interpretation of this law.” Making matters even less certain is the fact that just last month, SCOTUS refused to hear a lawsuit challenging Trump’s use of Section 301.Busch, however, is skeptical that the administration is operating within legal limits here. According to his reading of Section 338, a “calibration” is required first to assess whether any wrongdoing was committed by Canada that would warrant a U.S. tariff, and the International Trade Commission would also have to deliver an evaluation of it. So far, there hasn’t been any evidence that has happened.Yet, in classic Trump style, regardless of the legality of his use of Section 338, he’s already threatened a 50 percent tariff on Canadian autos come 2027. We may or may not get a court ruling before then.We hope you learned a thing or two from this edition of Executive Dysfunction. If you enjoyed reading it, please consider supporting our legal journalism by becoming a Slate Plus member!Elsewhere in JurisprudenceThank you for reading Executive Dysfunction! We’re thrilled to be in your feeds and will be back with more dysfunction analysis next week.