Following the breakdown of Canada-U.S. trade negotiations, the United States has moved ahead with tariffs under Section 338 of the Tariff Act of 1930. Effective 12:01 a.m. Eastern time on August 22, 2026, these tariffs apply to certain products of Canada in response to alleged Canadian discrimination against the United States in the dairy, alcoholic beverage, and motor vehicle sectors.
The duty rate for the new Section 338 tariffs is 50%. It applies to certain products in those industries, along with others. Impacted products are identified by Harmonized System (HS) code. You can review the full scope on the Federal Register using the links below.
Proc. 11047: Imposing Additional Duties to Offset Canadian Discrimination Against the Commerce of the United States With Respect to Dairy (July 20, 2026)
Please note that Canada has announced it will match these tariffs dollar for dollar. We’ll keep you informed as further details on Canadian countermeasures become available.
Products that qualify for duty preference under the United States-Mexico-Canada Agreement (USMCA) are NOT exempt from Section 338 tariffs. However, USMCA-qualifying products still benefit from the elimination of the Most Favored Nation (MFN) tariffs found in Column 1 of the Harmonized Tariff Schedule of the United States (HTSUS). Products that don’t qualify for USMCA preference will face the MFN tariff on top of the new 50% Section 338 tariff, along with any other applicable tariffs.
Exemptions
Certain products are exempt from the 50% Section 338 tariff under HTSUS heading 9903.03.15. These include:
- Articles of aluminum, steel, or copper, and derivative aluminum or steel articles
- Passenger vehicles (sedans, sport utility vehicles, crossover utility vehicles, minivans, and cargo vans) and light trucks, and their parts
- Medium- and heavy-duty vehicles, and their parts
- Wood products
- Semiconductor articles
- Patented pharmaceutical articles
In addition, under heading 9903.03.16, articles of civil aircraft (all aircraft other than military and unmanned aircraft), along with their engines, parts, components, subassemblies, and ground flight simulators and their parts, are also exempt.
Many of these products remain subject to Section 232 tariffs and other applicable duties. We encourage you to confirm whether your products qualify for an exemption.
Impact on customs bonds
Any new tariff can push an importer’s duty outlay beyond the value of its current customs surety bond. It’s important to understand how these tariffs affect you and to act early on any potential customs bond issues. Being proactive now helps you avoid disruptions later. For more information, please click here.