The 50 percent problem with Trump’s Canada tariffs

President Trump recently used Section 338 of the Tariff Act of 1930 as the legal basis for his new trade war on Canada, imposing 50 percent tariffs on some $20 billion in goods that the U.S. imports annually, covering everything from hockey sticks to alcohol. 

But “up to 50 percent” does not mean 50 percent whenever the president feels like it. And it doesn’t mean any form of alleged discrimination. Congress passed Section 338 to give the president a tool to retaliate against foreign countries that discriminated against the U.S. in tariffs and other customs matters, not against any practice that the government deems unfair. These distinctions could become important when Trump’s new tariffs on Canada invariably end up in court.

The Federal Circuit Court’s decision in HMTX Industries v. U.S. explains why. Importers challenged the massive expansion of the tariffs Trump imposed on China in his first term under Section 301 of the Trade Act of 1974. If the administration could turn an initial $50 billion trade action into tariffs covering more than $350 billion in imports, they asked, what prevented this provision from authorizing an all-out trade war?

The Federal Circuit rejected that argument. The U.S. Trade Representative’s power was not limitless, the court explained, because any modified tariff remained tied to the original action and had to be tailored to the statutory goal of eliminating the Chinese conduct under investigation. It could not raise tariffs “for any reason” or by an amount that wasn’t “appropriate” to achieve its original goal.

Those limiting principles should matter under Section 338.........

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