By Jennifer Lee

July 21, 2026

Canada is not the only victim of new US tariffs intended to replace the “Liberation Day” tariffs. Since the U.S. Supreme Court overturned President Trump’s International Emergency Economic Powers Act (IEEPA) tariffs in February, the White House has been working on alternative tools to perpetuate Trump’s tariff war.

What started with the 10% global Sec. 122 tariff, expiring July 24, is continuing with a layering of various other tariff authorities and USTR investigations, with implications for Canada and other US trade partners.

What is significant about the latest 50% tariffs targeting Canada?

Unlike many of the other U.S. tariffs affecting Canada (e.g., Sec. 232 tariffs targeting autos), goods covered under the USMCA/CUSMA are not exempted. The USMCA/CUSMA deal previously protected over 90% of goods arriving to the U.S. from its largest export market. Tariffs on Canada go from a largely unrealized penalty (excepting steel and aluminum) to an effective rate that certainly requires importers to pass along most of the impact.

The failure of the three parties to renew the USMCA/CUSMA by July 1 (Canada and Mexico formally requested to renew, but the US withheld) kicked the deal into annual reviews until it is renewed, a party formally withdraws, or it expires in 2036. But Trump’s Canada animus has plagued talks, with the U.S. and Mexico holding their third formal negotiating round July 22 while Canada-U.S. formal negotiations have not even started.

The Sec. 338 instrument under the Tariff Act of 1930 (AKA Smoot-Hawley), which authorizes tariffs to counter discrimination against U.S. commerce, has not been used for decades and it is unclear if it has been used to implement tariffs before. Like the Sec. 122 duties, it will certainly be challenged in court.

Canada is the proximate target, but the implications are far-reaching

The Sec. 338 tariffs add to the flurry of tariff announcements produced by Washington since the overturn of IEEPA. These include Sec. 301 tariffs targeting specific countries (e.g., Brazil is newly facing a 25% tariff, an investigation is targeting Germany, multiple investigations target China) as well as broader investigations, such as an effort to tariff 60 economies – including Canada – at 10-12.5% over alleged failures to enforce forced labor laws for imported goods and an ongoing investigation into 16 economies for excess capacity. These efforts are working together to reconstruct Liberation Day tariffs in the absence of IEEPA authorizations, with no sign of slowing down soon.

The effects also extend to the U.S. itself. For those keeping score, recall that Trump’s trade aggression was supposedly undertaken for two reasons: to wipe out bilateral trade imbalances and to return manufacturing jobs to the US. The reality is the U.S. trade deficit is at record levels and American manufacturing has lost over 100,000 jobs since the trade war began.

Meanwhile, Canada is among the few countries (e.g., China) that effectively carried out significant and selective retaliation against US duties. With roughly a dozen competitive House races occurring in districts that border Canada, inviting the risk of potential retaliation from Canada is further evidence that Trump has accepted loss of Republican control of the House as a given in US midterm elections this fall.

What can we expect to see from Ottawa and Washington?

Trump’s announcement occurs as Canadian premiers are meeting this week in Prince Edward Island – they met with Prime Minister Carney virtually on Tuesday and will be joined by him on Wednesday. Discussions will doubtless test ideas for a response. Watch for the Carney government’s reaction.

Keep in mind that Canada is not receiving special treatment. Prepare for the certainty that additional US tariff authority will be deployed in the coming weeks to replace expiring Sec. 122 duties. Expect the global US duty average to return to 12.5% or higher (a range the White House believes markets will largely ignore as just the new normal), guaranteeing that global US standing — now at a two-decade low — is set for further decline and that trade partners will continue pursuing diversification efforts.

Jennifer Lee is a Senior Associate at The Scowcroft Group, where she provides analysis to corporate clients and financial institutions covering East Asia, the Americas, tariffs, resources and the energy transition, as well as export controls.