Trump invokes 1930 tariff law to escalate trade war

New tariffs to raise $240 billion to $260 billion annually, analysts estimate

President Donald Trump’s trade war has expanded significantly in the past two weeks, with the administration deploying an obscure provision of the 1930 Smoot-Hawley tariff law — Section 338 — that had never been used in the law’s nearly 100-year history. Trump announced he would use that authority to impose 50% tariffs on Canada, according to the Wall Street Journal.

The move represents the latest escalation in a trade policy that has continued to intensify despite the Supreme Court’s February ruling that struck down Trump’s primary tariff authority under the International Emergency Economic Powers Act. The court held that the law did not explicitly authorize tariffs and that Congress would not delegate so much of its power to the president without expressly saying so.

Trump responded by shifting to other legal authorities. He used Section 122 to impose a temporary 10% universal tariff, Section 232 — aimed at protecting industries vital to national security — and Section 301, which targets unfair trade practices. The new tariff actions include 25% duties on Brazil, up to 200% on generic drugs, and levies of 10% to 12.5% across as many as 60 trading partners, Trump announced Thursday.

Evercore ISI, an investment bank, estimated the new tariffs will raise $240 billion to $260 billion a year, the firm said. That is about 20% less than the maximum the administration could have collected under the struck-down IEEPA authority but still roughly triple the pre-Trump tariff level.

Trade lawyers and former officials questioned the legal basis and logic of the administration’s approach. John Veroneau, a trade official under President George W. Bush and now senior counsel at Covington, said Section 338 was originally intended to penalize countries that discriminated against the U.S. relative to other trading partners, with the goal of achieving equal treatment for all. He noted that under the U.S.-Mexico-Canada Agreement, Canada already gives the U.S. preferential access. Trump’s use of Section 338 to punish Canada for retaliating against his earlier tariffs is “ironic if not perverse,” Veroneau said. “In effect, he is laying down the principle that discrimination is acceptable as long as it’s the U.S. doing the discriminating.”

Sarah Bianchi, a former Biden administration trade official now at Evercore ISI, said Section 338 “is possibly the new IEEPA.” She added, “If he’s able to use this tariff for leverage, I don’t know why he wouldn’t keep trying. As to which one is next, the European Union would be on your list.”

Congress is considering a bill that would further expand Trump’s tariff authority. The bill, championed by the late Sen. Lindsey Graham (R-S.C.) before his death, would impose steep tariffs on Russia for invading Ukraine, but at Trump’s behest it was weakened to allow the president to issue waivers. Peter Harrell, a former Biden adviser on trade and sanctions, said the bill as written would let Trump waive tariffs on Russia while using the authority to tariff the European Union for refusing to back his policies on Iran. “If he does not seem interested in putting pressure on Russia, but does seem interested in this bill, what would his interest be?” Harrell said. “The tariffs.”

Sen. Ron Wyden (D-Ore.) said at a Senate Finance Committee hearing Wednesday that “it’s well past time to put Congress back in the driver’s seat on trade.” The bill is gaining support in the Senate, while its fate in the House remains unclear.

The Supreme Court’s February ruling, instead of constraining Trump’s trade policy, has led him to rely on a patchwork of decades-old laws that Congress never intended to be used for sweeping tariff actions. Section 122 was originally aimed at balance-of-payments problems from a fixed exchange-rate system that ended over 50 years ago. Section 232 was designed to protect industries vital to national security, which Trump now defines to include lumber and generic drugs. Section 301, which targets unfair practices like Chinese industrial subsidies, is now being used to penalize countries that fail to police their own imports for forced labor.

The House of Representatives’ trade oversight committee maintains a compilation of all U.S. trade statutes, running more than 1,400 pages. A decade ago, trade lawyer John Veroneau noticed it did not include Section 338 of the Smoot-Hawley law. When he pointed this out, he recalled, a committee staffer said, “Surely this has been repealed?” It was not.