LeBlanc and Charette wrapped two days of Washington meetings this week with Section 338’s August 19 cliff approaching and the President publicly declaring he has no interest in the trade framework Canada is trying to save
OTTAWA, July 30, 2026 – Canada’s chief trade envoys returned from Washington this week having spent two days negotiating with an administration whose President had announced, the day before their arrival, that he does not want the agreement they were there to preserve.
Canada-United States Trade Minister Dominic LeBlanc flew to the American capital on Monday, July 27, accompanied by Chief Trade Negotiator Janice Charette, for meetings on Tuesday and Wednesday, according to reporting by CTV News and The Globe and Mail. It was the first in-person engagement since President Donald Trump signed the Section 338 proclamations on July 20 imposing an additional 50 per cent duty on roughly $20 billion in Canadian goods effective August 19.
On July 28, while LeBlanc was in Washington, Trump told Fox News Channel’s Fox and Friends by telephone that he had no interest in preserving or updating the Canada-United States-Mexico Agreement. “I don’t care,” he said when asked directly, according to the account carried by Reuters. “I mean, I don’t really want to. I’d rather be independent. Here’s the thing: Mexico and Canada need us. We don’t need them. The deal is important for them. It’s not important for us.”
Twenty-one days now separate Canadian exporters from the largest single tariff escalation in the history of the bilateral relationship. The negotiation intended to prevent it is being conducted, on the American side, by an administration whose principal has publicly described the object of the negotiation as unimportant.
The Mechanics of the August 19 Cliff
The measure taking effect on August 19 is legally and practically different from the tariff rounds that preceded it, and the differences matter for anyone calculating landed cost.
Section 338 of the Tariff Act of 1930 authorizes the President to impose additional duties of up to 50 per cent on imports from any country found to discriminate against United States commerce. It requires no investigation, no hearing, no injury determination, and no congressional approval. A presidential proclamation is sufficient. Its last confirmed use before July 2026 was in 1949.
The proclamations cover approximately $20 billion in Canadian goods across 554 tariff lines. Reported categories include dairy products, alcoholic beverages, electronics, machinery, wood products, clothing, cement, wine, and hockey equipment. Energy products, potash, fish, and critical minerals are excluded.
Two features deserve particular attention from trade compliance teams.
First, the duty applies notwithstanding CUSMA origin. Goods that satisfy the agreement’s rules of origin, and that would otherwise enter duty free, will be assessed the additional 50 per cent. The Center for Strategic and International Studies confirmed the override in its analysis of the proclamations. For exporters who have built compliance infrastructure around regional value content calculations and origin certification, this is a structural change: the certification remains legally accurate and commercially worthless on the covered lines.
Second, the duty stacks. The 50 per cent is additional to existing measures, not a replacement for them. Canadian steel and aluminum already face a 25 per cent duty. Canadian-assembled vehicles face 25 per cent. Most other goods carry a 10 per cent baseline levy. On covered lines that also attract a sectoral duty, the cumulative rate will substantially exceed 50 per cent. Firms modelling August 19 exposure need to build the stack rather than substitute the headline number.
There is no automatic expiration date attached to the Section 338 duties.
Why This Statute, and Whether It Survives
The administration’s choice of a 96-year-old provision was not stylistic. It was forced.
In February 2026, the Supreme Court of the United States decided Learning Resources, Inc. v. Trump, striking down the broad tariff authority the President had been exercising under the International Emergency Economic Powers Act. That ruling removed the legal foundation of most of the 2025 tariff architecture. Section 338, which predates the entire postwar trade system and contains no procedural safeguards, became the available alternative.
That choice has drawn immediate and substantial legal criticism. Scott Lincicome, vice president of general economics at the Cato Institute, described the move as “the nuclear option” in comments to Fortune. Philip Zelikow, an emeritus professor at the University of Virginia writing at the Volokh Conspiracy, has argued that Section 338 is no longer valid law because it was superseded by the Trade Expansion Act of 1962 and by Section 301 of the Trade Act of 1974, and that courts will almost certainly be asked to resolve the question. The Peterson Institute for International Economics has warned that the provision risks being found as illegitimate as the IEEPA authority the Supreme Court rejected in February.
The stakes extend well past Canada. If Section 338 survives challenge, it becomes a general-purpose instrument deployable against the European Union, China, Japan, or any other trading partner on the strength of a proclamation alone. That prospect is why the Canadian case is being watched closely in Brussels and Tokyo.
For Canadian importers of record and their American customers, the litigation risk has a concrete operational dimension. Duties paid under a measure later held unlawful are potentially recoverable, but recovery generally depends on having preserved the claim through timely protests and protective filings. Companies expecting to pay substantial Section 338 duties after August 19 should be discussing preservation strategy with United States customs counsel now rather than after the first entries liquidate.
CUSMA in a Zombie State
The Section 338 action arrived three weeks into a separate and equally consequential process: the collapse of the CUSMA renewal.
July 1, 2026 was the date fixed for the agreement’s mandatory six-year joint review. Under Article 34.7, the three parties could extend the agreement to 2042 or enter a sequence of annual reviews running to a 2036 expiry. The United States declined to extend. The agreement therefore remains in force, but on a clock, with termination in 2036 the default outcome absent revised terms.
Canadian trade analysts have taken to describing the result as a zombie agreement: technically alive, functionally suspended, and capable of being prolonged in that state for as long as it suits Washington. An Expert Group on Canada-United States Relations, writing on July 3 in a report titled Beyond Renewal, urged Ottawa to hold a posture it described as “firm but constructive” and warned that speed would not guarantee stability. The group pressed for enforceable terms and a functioning dispute settlement mechanism rather than a deal resting on signatures alone.
LeBlanc used the July 1 trilateral session, which put him across the table from United States Trade Representative Jamieson Greer and Mexican Economy Secretary Marcelo Ebrard, to name Canada’s sectoral priorities. “Addressing sectoral tariffs on Canadian steel, aluminium, autos and lumber,” he said, listing the files Canada wants resolved. He argued Canada negotiates from strength on the basis that the agreement runs to 2036 and can be renewed at any time.
Since then the trilateral track has fractured. Greer completed a third round of bilateral talks with Mexico in the week before LeBlanc’s Washington trip, aimed at updating CUSMA. Those discussions ended without resolution and exposed deep disagreement over automotive content rules. Canada has been largely absent from formal trilateral negotiations, working instead through bilateral channels. Members of the American trade team have reportedly described Mexican negotiators as pragmatic while complaining that the Canadians are difficult.
The sequencing tells its own story. The Section 338 tariffs were signed three weeks after the joint review commenced. The administration is treating renegotiation and tariff escalation as entirely separate tracks. Canada can negotiate in good faith and be tariffed anyway, regardless of what CUSMA provides.
What LeBlanc Is Actually Negotiating For
Canadian officials have pushed for a bilateral framework that would restore duty-free treatment for compliant goods and provide some measure of predictability. The difficulty, which has been apparent since the spring, is that the American side has shown little interest in binding commitments that would constrain future tariff action.
That difficulty is precisely what Trump’s Fox News remarks crystallized. If the President regards the existing framework as unimportant to the United States, there is limited reason to expect enthusiasm for a new one that would constrain American discretion further.
Carney identified the problem directly after the Charlottetown premiers’ meeting on July 23. “I have to be convinced, the team has to be convinced, the premiers have to be convinced that an agreement is worth the paper it’s written on,” he told reporters, in remarks reported by The Washington Post. It is an unusual thing for a head of government to say publicly about a negotiation in progress, and it reflects a specific concern: Canada has now watched CUSMA commitments overridden by unilateral action twice, first through IEEPA and now through Section 338. A third agreement carries an obvious credibility problem unless it comes with enforcement that has teeth.
Carney has framed the August 19 date not as a catastrophe but as a pressure point. After speaking with Trump on the morning of July 20, he told reporters in Ottawa: “I spoke this morning with the U.S. president and we agreed to deepen and speed up our negotiations over the next few weeks.” By July 23 his tone had hardened. “Everything’s on the table if there’s no agreement, depending on the outcome of the negotiations,” he said, declining to specify retaliatory options in advance. “If these tariffs, or other measures come into force, there’s a full range of things that we can do.”
On Wednesday, July 29, in Alberta, Carney narrowed the range meaningfully by ruling out energy export restrictions or export taxes as a retaliation tool, telling reporters “I don’t see the value of it” and stressing Canada’s standing as a reliable supplier.
Unusual Allies
One notable intervention came from a direction the administration might not have expected. On July 28, the United Steelworkers and the International Association of Machinists, two industrial unions representing workers on both sides of the border, jointly urged Greer to reconsider tariffs on Canadian goods and to work cooperatively with Canada on Chinese trade practices instead.
“Our two nations share a deep collaboration built on decades of economic integration as well as intelligence and defense cooperation,” United Steelworkers International President Roxanne Brown said in a statement.
The intervention matters because it complicates the domestic political economy of the tariffs. Section 232 duties on steel and aluminum have historically enjoyed union support in the United States. A joint letter from those same unions arguing that Canada is the wrong target, and that Chinese overcapacity is the right one, undercuts the labour rationale for the broader Canadian escalation.
Industry has raised a parallel objection on the auto file. Automotive components can cross the Canada-United States border as many as eight times during production before final assembly, which means tariffs on Canadian content function as a tax on American assembly. Economist Art Laffer, writing for the Alliance for Automotive Innovation, estimated that a global 25 per cent auto tariff could raise average vehicle prices in the United States by $4,711.
Trump has defended the campaign by pointing to reshoring investment, citing Toyota’s $3.6 billion commitment to expand truck production in Texas. “We have the hottest car business,” he said on Fox News. “We’re right now building more car plants than at any time in our history.” The counter-argument is that the tariffs raising Toyota’s incentive to build in Texas are simultaneously raising costs across the existing American fleet of assembly plants, and that Canadian consumers have already responded by shifting roughly $5.6 billion, about 22 per cent, of their vehicle purchases away from American-made models between April 2025 and March 2026.
A Bridge and a Ceremony
The diplomatic atmosphere surrounding LeBlanc’s trip was set by an event that was supposed to symbolize the opposite.
The Gordie Howe International Bridge, a $4.5 billion span connecting Windsor, Ontario with Detroit, Michigan and the largest cross-border infrastructure project in decades, opened to traffic on July 27, the day LeBlanc flew to Washington. Named for a hockey player revered in both countries, it was conceived as a monument to integration.
The joint ribbon-cutting was cancelled over the trade dispute. Canada held a solo ceremony on July 24, attended by Premier Doug Ford in a Team Canada jersey bearing Howe’s number nine. Trump, who had previously threatened to block the bridge from opening and demanded half of its ownership and toll revenue, said Canada had “disinvited” the United States. Carney responded that Canada paid for the bridge and that ownership is shared with the state of Michigan.
The Windsor-Detroit corridor moves approximately CAD $274 million in trade per day, according to Al Jazeera’s reporting on the opening. The bridge will carry that traffic more efficiently than the infrastructure it supplements. Whether it carries as much of it after August 19 is a separate question.
Economic Exposure Heading Into the Deadline
The Canadian economy enters this deadline in weaker condition than it entered the 2025 rounds.
Canada directs roughly 73 per cent of its goods exports to the United States. Cross-border trade in goods and services ran at nearly $3.6 billion per day in 2024. The Bank of Canada estimates approximately two million Canadian jobs depend on goods exports to the American market.
Canadian manufacturing lost 32,161 jobs between January 2025 and January 2026, according to Export Development Canada, with motor vehicle parts accounting for 7,294. Real GDP grew 1.7 per cent in 2025, the weakest showing since the pandemic contraction, and fell 0.6 per cent in the fourth quarter.
The auto sector is the most exposed to what happens next, given integrated supply chains, existing 25 per cent duties, and the job losses already recorded. Beverage alcohol, dairy, and wood products face the sharpest proportional increases on the newly covered lines.
What Businesses Should Do in the Next Three Weeks
For Canadian exporters on covered lines, the window for operational response is closing. The practical checklist:
Confirm exposure line by line. Do not rely on sector-level summaries. Pull the tariff lines for every product shipped to the United States and check them against the proclamation annexes. The 554-line list includes items that surprised their own manufacturers.
Model the full duty stack, not the headline rate. A product already subject to a Section 232 steel derivative duty plus the 10 per cent baseline plus 50 per cent under Section 338 is not a 50 per cent problem.
Assess acceleration where it is genuinely available. Landing goods before August 19 helps only if inventory, production, and logistics allow it, and only if the American customer can hold the inventory. Warehousing costs and working capital need to be in the calculation.
Revisit Incoterms and contracts. Where the Canadian seller is importer of record on DDP terms, the duty lands on the Canadian party. Review force majeure, change in law, and price adjustment clauses. Have the pass-through conversation with customers before the duty hits, not after the first invoice.
Examine bonded and foreign trade zone options on the American side, along with duty drawback where re-export is realistic.
Preserve refund rights. Given the serious legal challenge expected against Section 338, protective protests on entries may prove valuable. This requires American customs counsel and it requires setting it up in advance.
Diversify with realism. Carney’s January 2026 arrangement with China, the concluded negotiations with the United Arab Emirates, and existing access under CETA and CPTPP all offer genuine alternatives, but requalifying products, finding distribution, and building customer relationships in new markets takes quarters, not weeks. Diversification is the answer to the 2027 problem, not the August 19 problem.
For Canadian importers of American goods, the mirror exercise applies. If Ottawa reinstates counter-tariffs after August 19, the most likely vehicle is a surtax order resembling the 2025 lists. Check classifications against those lists, verify origin documentation, identify which inputs have no non-American substitute, and prepare remission applications in advance. Firms that secured remission in 2025 should retrieve those files now.
Outlook
Three outcomes are plausible on August 19: a framework agreement that suspends or narrows the duties, a delay of the effective date, or full implementation.
LeBlanc’s office has offered no public assessment of where the week’s meetings left the odds. What is clear is that the negotiation is proceeding without the ordinary premise of trade diplomacy, which is that both parties value the framework being negotiated. Trump removed that premise on the record on July 28.
Any agreement reached in the next three weeks will need to function without the assumption that written commitments constrain future action. That is a demanding specification, and it is the one Carney articulated on July 23 when he said he needed to be convinced any agreement was worth the paper it was written on.
Canadian businesses planning for August 19 should assume the duties take effect and be pleasantly surprised if they do not. The cost of preparing for an escalation that does not arrive is modest. The cost of the reverse is not.