Section 338 Tariffs on Canadian Goods Paused as U.S., Canada Work Toward Trade Deal5 Min Read

Fifty percent tariffs on certain Canadian goods that were scheduled to take effect at 12:01 a.m. ET on August 19 have been paused for three days as Canada and the U.S. work to finalize a new trade agreement. The tariffs, imposed under Section 338 of the Tariff Act of 1930, would affect roughly $20 billion in Canadian imports across a broad range of products, from wine and hockey equipment to cement and other consumer and industrial goods. Federal Reserve Bank of Chicago researchers estimate the three Section 338 actions cover 569 product categories and approximately 5.5% of annual U.S. imports from Canada.

Where U.S.-Canada trade relations stand

The pause comes against the backdrop of a reformation of the U.S.-Canada trade relationship. During the July 1 joint review of the United States-Mexico-Canada Agreement (USMCA), the U.S. declined to renew the agreement in its current form. USMCA remains in force, while the parties continue working through outstanding issues. Canadian Prime Minister Mark Carney said the two countries have made “substantial progress” in recent negotiations while acknowledging that important work remains.

Tariffs remain an important part of that broader picture. Existing U.S. Section 232 duties continue to affect sectors including steel, aluminum, and other products, while Canada has maintained tariff and relief measures of its own in response to U.S. trade actions. The Section 338 actions were specifically introduced in response to U.S. concerns over Canadian policies affecting American alcoholic beverages, dairy products, and motor vehicles.

What may be coming next

Under the August 18 presidential proclamation, the Section 338 tariffs are now scheduled to become effective at 12:01 a.m. ET on August 22. If the countries finalize an agreement before then, the administration could modify, further suspend, or revoke the duties. If negotiations do not produce an agreement or another extension, covered imports could face the additional 50% duty beginning Saturday.

The scope of the tariffs also warrants close attention. The original proclamations state that covered goods may be subject to Section 338 duties even when they otherwise qualify for preferential treatment under USMCA. Certain categories, including energy, potash, products already subject to Section 232 tariffs, fish, and critical minerals, were excluded.

Companies importing from Canada should continue reviewing HTS classifications, country of origin, purchase orders, and goods in transit so they can quickly assess the impact of any final agreement or renewed tariff action.

Continue evaluating your total tariff exposure

The three-day pause gives importers some immediate breathing room, but the broader tariff environment remains complex. Section 232 and Section 301 tariffs continue to affect many products and trading relationships, and applicable tariffs, ordinary duties, and other trade remedies can create layered costs depending on the product, origin, and circumstances.

UHY works with middle-market companies to evaluate tariff exposure, assess classifications and sourcing decisions, identify mitigation and recovery opportunities, and understand how changing trade policy could affect margins, pricing and supply chains. While the Section 338 tariffs on Canadian goods are paused, businesses dealing with other tariffs should continue reviewing their exposure and preparing for additional changes as negotiations evolve.

For a deeper look at the current tariff environment, watch UHY’s recent webinar, The Latest Tariff Shift: Section 122 Expiration, 301 and 232 Expansions and Refund Considerations.

Watch the 30-Minute Tariff Briefing