Canada’s trade minister and chief negotiator head to Washington with three weeks left on the clock before 50 per cent Section 338 duties hit roughly C$28 billion in exports
OTTAWA, July 28, 2026
Canada-U.S. Trade Minister Dominic LeBlanc will travel to Washington this week alongside Canada’s chief trade negotiator to the United States, Janice Charette, in the most concrete sign yet that Ottawa intends to negotiate rather than retaliate its way out of the 50 per cent tariffs scheduled to strike a broad slice of Canadian exports on August 19.
A spokesperson for LeBlanc’s office confirmed the trip to CTV News on Monday, July 27, but declined to say which days the minister and Charette would be away or whom they would meet, according to reporting by CTV News and BNN Bloomberg. The reticence is itself informative. With eighteen months of trade conflict behind them and three weeks of runway ahead, Canadian officials have concluded that the quietest possible diplomacy carries the best odds.
The stakes are unusually concrete. On July 20, President Donald Trump signed three separate proclamations invoking Section 338 of the Tariff Act of 1930, imposing an additional 50 per cent ad valorem duty on hundreds of Canadian product lines effective 12:01 a.m. Eastern time on August 19. The Office of the United States Trade Representative put the affected trade at nearly US$20 billion in annual imports. Canadian outlets, including CBC News, have pegged the same basket at roughly C$28 billion of annual exports to the United States.
A dormant statute, suddenly awake
What makes the August 19 deadline different from the many tariff deadlines Canadian exporters have absorbed since early 2025 is the legal instrument behind it.
Section 338 of the Tariff Act of 1930 authorizes the president to impose duties of up to 50 per cent on the goods of a foreign country that he finds discriminates against the commerce of the United States relative to the commerce of other countries. In an alert dated July 27, the international trade practice at Wiley Rein LLP noted that Section 338 “has not been used or threatened for at least 70 years” and described the action as an expansion of the trade tools employed by the United States. The statute caps the duty at 50 per cent, allows tariffs to take effect 30 days after proclamation, and permits the president to suspend, revoke, supplement or amend the proclamation afterward.
That last clause is the reason LeBlanc is on a plane. Unlike a Section 232 national security action, which is anchored to a Commerce Department investigation and a formal record, a Section 338 proclamation can be switched off by the same pen that switched it on. Canadian officials have read the 30-day runway as an invitation, and the White House has done little to discourage that reading.
Ambassador Jamieson Greer framed the action in explicitly retaliatory terms. “While the Administration continues to secure fair and reciprocal trade deals with our trading partners, Canada, unlike other partners and allies, continues to retaliate against the United States for its efforts to rebalance trade and protect U.S. industry in national-security sensitive sectors,” Greer said in a statement issued the day of the proclamations. He listed three specific grievances: that Canada has taken U.S. alcohol products off Canadian shelves, that it has given better market access to dairy products from the European Union, and that it has capped U.S. vehicle exports to Canada from companies reshoring production to the United States.
Each of the three proclamations is tied to one of those irritants, and each carries its own annex of Canadian goods. The pairing is not intuitive. The dairy proclamation reaches milk and cream, whey, lactose, fructose syrups, molasses, nonalcoholic beer, peppermint oil and peptones. The alcohol proclamation reaches malt beer, wine, cider, brandy, whiskies and other liquors, certain wood and paper products including wooden tableware and basketwork, and ice-hockey and field-hockey equipment.
The motor vehicle proclamation is by far the widest, and it is where most Canadian exporters will find themselves. Wiley’s summary of the annex lists honey, feathers, flower bulbs and seeds, certain mixes and doughs, salt, Portland cement, paints and varnishes, essential oils, makeup, candles, gelatin, fatty acids and alcohols, sorbitols, vinyl tile floor coverings, plastic sacks and bottles, animal hides, leather and travel goods, wood mouldings, particle board, MDF, plywood and veneered panels, doors, picture frames, pulpwood, sanitary paper stock, wallpaper, envelopes, paper tablecloths and napkins, paper bags, diaries and notebooks, paper plates, yarns, non-woven textiles, ropes, fabrics, apparel, curtains, tarpaulins, flags, hats, glassware, gold and silver and imitation jewellery, direct reduced iron, refined lead, hand tools and saw blades, razors, locks, metal statuettes, hydraulic turbines, refrigerating equipment, filtering machinery, packing and closing machinery, sandblasting machines, lifting and handling equipment, vacuum cleaners, smartphones, video recording apparatus, solid state storage devices, cameras, radar apparatus, monitors, digital projectors, fibre optic cables, motorcycles, boats and docks, optical measuring equipment, seats and furniture, chandeliers and lighting fixtures, toys and video game consoles, Christmas ornaments, golf equipment, ice skates, exercise equipment, swimming pool gear and fishing rods, and certain art, antiques and collectors’ items.
Reduced to a sentence: a duty nominally about cars, cheese and liquor lands on smartphones, cement and Christmas ornaments.
CUSMA offers no shelter
The single most consequential technical feature of the July 20 actions is that they override preferential origin. Wiley’s alert is explicit that the new duties “will apply even to certain products that qualify as originating under USMCA, meaning duty-free treatment under the agreement does not shield importers from these measures.”
For Canadian exporters who spent 2025 rebuilding supply chains to secure CUSMA origin, that is a bitter result. Origin certification remains the difference between paying and not paying on a long list of other measures, but it buys nothing under Section 338.
There are carve-outs, and they matter. The new duties do not apply to products already subject to Section 232 tariffs, including certain steel, aluminum and copper articles, nor to goods covered by the World Trade Organization Agreement on Trade in Civil Aircraft and certain other specified products. Reporting on the proclamations has also identified exclusions for energy products, potash, fish and critical minerals. The anti-stacking design means that a Canadian steel derivative already carrying a Section 232 duty is not hit twice, and it means aerospace supply chains are largely spared.
Ottawa’s calibrated response
Prime Minister Mark Carney’s July 20 statement set the tone Ottawa has held since. He characterized the measures as “the latest in a series of unilateral U.S. trade actions that began with the U.S. imposing a series of tariffs in direct violation of the Canada-United States-Mexico Agreement,” and argued that Canadian countermeasures had been proportionate. “These include tariffs on the Canadian auto sector, in violation of CUSMA. Canada, as is its right, has merely matched those measures,” Carney said.
He also, notably, left the door wide open. “Recognising that the U.S. has been transforming all of its trade relationships, including those covered under CUSMA, over the past 18 months, Canada has made a series of detailed and comprehensive proposals to resolve this dispute and to modernise CUSMA. We stand ready to intensify those discussions in the coming weeks,” the statement read.
Three days later, in Charlottetown, Carney met privately with all 13 provincial and territorial leaders and then declined to name a single retaliatory measure. Speaking to reporters after the roundtable, he said “everything’s on the table” while cautioning that “it would be counterproductive at this stage to respond in advance. But it’s important to know what your options are, to have worked it through,” in remarks reported by BNN Bloomberg and Canada’s National Observer. He said he did not expect a finalized plan immediately but hoped one would be in place within roughly two weeks, a timeline that now expires within days of LeBlanc’s Washington meetings.
Carney also floated the possibility that the tariff threat is a bargaining device. “We’ve seen a series of trade negotiations that the U.S. has undertaken, and normally there’s a deadline,” he said.
On the American side, the signals are similarly ambiguous. In a briefing with reporters last week, a senior Trump administration official described discussions between Canada and the United States as “substantive” but could not offer a timeline for when formal talks would begin, according to CTV News.
The provincial complication
LeBlanc arrives in Washington carrying a mandate he does not fully control. Two of the three American grievances Greer named are matters of provincial jurisdiction or long-standing federal policy that Ottawa cannot trade away casually.
The alcohol file is the clearest example. Provincial liquor monopolies pulled American products from shelves beginning in March 2025, and most have not restored them. Ontario Premier Doug Ford said last week that the LCBO moratorium on U.S. booze will stay despite the renewed tariff threat, telling reporters “we can’t keep rolling over,” as reported by CP24 and Global News. Ontario’s finance minister has said nothing short of full removal of U.S. tariffs would bring American products back to LCBO shelves. British Columbia Premier David Eby was blunter still, telling CBC News there was “not a chance in hell” U.S. alcohol was returning to provincial shelves. Saskatchewan and Alberta have reversed their bans; Ontario and Quebec have not.
The cost of the standoff is not trivial for the provinces either. BNN Bloomberg reported earlier this month that Ontario has spent roughly $8 million so far storing the American alcohol it removed from sale, and Global News has reported that roughly $2 million worth of that inventory has since expired. In the proclamation itself, Trump asserted that Canadian imports of U.S. alcohol fell approximately 81 per cent between March 2025 and February 2026 compared with the same period a year earlier.
Supply management is the second immovable object. The system of production quotas, set pricing and import quotas covering dairy, eggs and poultry is protected by statute and defended by a farm lobby with a long history of bringing tractors and cattle to Parliament Hill when concessions are rumoured. Reporting by CBC News and The Globe and Mail this month has focused on whether American negotiators are effectively demanding what Canadian politicians of every party have promised not to give.
The third grievance, the cap on U.S. vehicle exports to Canada from reshoring automakers, is the one Ottawa has the most room to move on, because it is a federal remission framework rather than a treaty obligation. Under that framework, Canada cut General Motors’ annual tariff-free import quota by 24.2 per cent and Stellantis’ by 50 per cent in late 2025 after both companies scaled back Canadian production, according to reporting by The Detroit News and Bloomberg. Restoring or restructuring those quotas is within LeBlanc’s gift, though doing so without extracting production commitments would be politically costly in Ontario.
What the tariff does to the numbers
TD Economics published the most widely cited early assessment. In a July 21 commentary, director and senior economist Andrew Hencic estimated the affected goods represent roughly 5 per cent of Canadian exports to the United States, and concluded that if the tariffs are maintained they would likely take between 0.3 and 0.6 percentage points off Canadian GDP growth over the next year, absent major changes in business behaviour or a government response. TD said it believes the ultimate impact would track closer to the lower end of that range.
The reasoning behind the estimate is worth understanding, because it explains why a measure covering only 5 per cent of exports carries outsized weight. TD anchored its analysis in the steel experience: Canadian exports of iron and steel and their products are down roughly 50 per cent relative to pre-tariff levels as American demand shrank. The implication TD draws is that the products chosen for the Section 338 annexes were selected precisely because demand for them is highly responsive to price. A 50 per cent duty on a discretionary consumer good does not raise revenue so much as it ends the trade.
TD also flagged two mechanical effects Canadian firms should expect. Businesses are likely to front-run the August 19 deadline, which will make monthly trade data unusually volatile through the summer, and the data are unlikely to reflect the full effect of the tariffs until September, meaning the macroeconomic picture will not be legible until late in the year. Market reaction has so far been muted: TD noted the Canadian dollar down 0.2 per cent in the day after the announcement and Bank of Canada rate expectations essentially unchanged.
Small business sentiment is the softer indicator to watch. The Canadian Federation of Independent Business reported that small business confidence had improved before the new threat landed, with manufacturing showing tentative gains that nonetheless remained below historical averages, and warned that sentiment was likely to fall in August as the deadline approached.
What importers and exporters should be doing now
For anyone moving Canadian-origin goods into the United States, the practical checklist is short and time-sensitive.
First, classify and confirm coverage. The annexes operate at the tariff-line level, and the breadth of the motor vehicle annex means many companies will discover exposure in product lines they would never associate with automobiles. Wiley’s guidance to importers is to review whether products fall within the covered classifications, assess duty exposure beginning August 19, and evaluate inventory, sourcing and shipment timing strategies.
Second, watch for implementation guidance. Customs and Border Protection is expected to issue further guidance, Federal Register corrections and modifications to the Harmonized Tariff Schedule of the United States as implementation continues, along with CSMS messages and possible annex refinements before August 19. Trade advisers have cautioned that the list of covered goods has not finished settling. Any duty exposure model built this week should be rebuilt in mid-August.
Third, examine the timing of entry rather than only the timing of shipment. Duty liability attaches on entry, not on departure, which makes vessel and truck scheduling, warehouse entry, and the choice between consumption entry and bonded storage genuinely consequential in the next three weeks. Companies with foreign trade zone access or bonded warehouse capacity have optionality that others do not.
Fourth, read the contracts. Delivered duty paid terms shift the entire 50 per cent onto the Canadian seller. Where a Canadian exporter has quoted DDP into the United States on a multi-month purchase order, the tariff is a direct hit to margin with no automatic pass-through mechanism. Firms in that position should be seeking price adjustment or change-of-law relief now rather than in September.
Fifth, do not assume symmetry. Canadian importers buying from the United States face a different and still unresolved question: whether Ottawa’s eventual response takes the form of matching surtaxes, procurement restrictions, export measures or something else. Carney has deliberately refused to signal. Any Canadian importer with significant U.S.-origin purchases should be running scenarios rather than waiting for the order in council.
An unpriced variable
There is one more item on the table that no duty model currently captures. On July 25, closing out a week of escalating rhetoric, Trump renewed a threat to impose additional tariffs on Canada over wildfire smoke drifting into northern U.S. states. “We’re going to put a big tariff on Canada because of the smoke,” he told reporters, in remarks reported by CBC News, CBS News and CP24. He accused Canada of failing to maintain its forests and said the United States was being invaded by polluted air, asserting that the cost of the pollution “must of necessity be added to the TARIFFS Canada is currently paying.” More than 900 active wildfires were burning in Canada at the time, including in Manitoba and northern Ontario. Ottawa responded that it has spent billions of dollars on wildfire prevention in recent years.
No legal instrument has been identified for such a measure, and trade counsel have generally treated it as rhetorical. But it is a reminder that the Section 338 annexes are not the outer boundary of Canadian exposure this summer, and that LeBlanc’s negotiating counterparties are working with a shifting brief.
Three scenarios
The first and most favourable is a negotiated suspension before August 19. Section 338 permits it, the White House has kept the door open, and LeBlanc’s trip is designed to test it. The likeliest shape of such a deal involves movement on the auto remission quotas, some face-saving formula on alcohol that respects provincial jurisdiction, and a deferral of the dairy question into the broader CUSMA discussion. Canadian officials have not signalled that this is close.
The second is partial implementation. The president may amend a Section 338 proclamation, and the annexes are wide enough that trimming them would allow both sides to claim progress. Exporters of electronics, furniture and building products are the most plausible beneficiaries of any narrowing, since their inclusion is the hardest for Washington to justify on the stated rationale.
The third is full implementation followed by a Canadian response. That is the scenario Carney has spent two weeks preparing for without describing. It would arrive on top of existing Section 232 duties on steel, aluminum, copper, autos, lumber, furniture and heavy vehicles, and against the backdrop of a CUSMA that the United States declined to renew on July 1.
What to watch
Three markers will tell Canadian businesses which scenario is unfolding. The first is CBP guidance and any Federal Register correction narrowing or expanding the annexes; a narrowing signals negotiation. The second is whether Ottawa publishes an order in council or a notice of intent to consult on countermeasures before mid-August; a consultation notice would signal that Canada expects the tariffs to land. The third is whether Canada and the United States announce a formal CUSMA negotiating track. The United States and Mexico concluded a third bilateral round in Mexico City on July 23 and have already scheduled a fourth for Washington in September. Canada has no comparable calendar.
LeBlanc’s trip will not resolve any of it this week. But for the first time since the proclamations were signed, the two governments will be in the same room with a deadline that both of them can see.