The Decibel - Trump’s gamble on a Depression-era tariff law

Episode Date: July 23, 2026

U.S. President Donald Trump threatened to impose a 50-per-cent tariff on more than 500 Canadian goods effective next month. This is far from the first time the Trump administration has threatened levies on Canada. But this time, the administration has pulled a lever that dates all the way back to the 1930s. Today, Adrian Morrow, The Globe’s U.S. correspondent based in Washington, walks us through the Smoot-Hawley Act Trump has invoked, the strategy behind using it and what legal challenges the law could face. Questions? Comments? Ideas? E-mail us at [e-mail] Hosted by Simplecast, an AdsWizz company. See pcm.adswizz.com for information about our collection and use of personal data for advertising.

U.S. President Donald Trump escalated his trade war against Canada this week. On Monday, the president threatened to impose a 50% tariff on more than 500 categories of Canadian goods. They're set to take effect on August 19th. Some familiar items are on the list, but others are not so obvious. Basically everything from electronic equipment down to fake moustaches. It's really a grab bag of items that Trump is tariffing. Adrian Morrow is the globe's U.S. correspondent. They hit basically every alcohol, including many that Canada doesn't make.

Wines that come from one specific region of Hungary. Mascall, which I'm pretty sure you can't actually grow the cactuses for in Canada. Tariffs on Canadian dairy products go into the U.S. Electric control panels for industrial facilities, clothing. Antiques that are more than 100 years old, but less than 250 years old. Yeah, Christmas ornaments. Plastics and rubber products, furniture, bedding, and lighting, and, of course, hockey sticks. If you totaled up all of the exports of all of those products from Canada to the U.S. last year, you get $20 billion, which is about 5% of the total.

So it's the sort of thing that will be very important for the specific industries that are being hit. The Trump administration has threatened and imposed levies on Canada before. But this time, a different lever is being pulled to justify the. the tariffs, something that's never been used and goes all the way back to the 1930s. Adrian joins us from Washington, D.C. today. He'll walk us through this controversial tariff act, the strategy behind using it, and what legal challenges this law could face. I'm Cheryl Sutherland, and this is the decibel from the Globe and Mail. Hi, Adrian, great to be talking to you. Thanks for having me, Cheryl.

So, Adrian, these new tariffs are hitting a grab bag of items and industries. And the announcement on Monday, I think is fair to say it was a surprise. But can you help us understand how big of a deal is it that Trump will impose more tariffs on Canada? It's important in the sense that this is Trump, yet again, ratcheting up his trade war on Canada. You know, already Canada faces tariffs. It has faced since last year, Trump's tariffs on steel, autos, aluminum. You know, these big industrial products, those are sectors where Trump has sort of explicitly said that he wants all of the production, those industries to move to the United States. He essentially wants to explicitly destroy Canada's auto industry.

So we're already facing a pretty serious trade war launched by the President of the United States. And then this just sort of adds to it. You know, interestingly enough, he's exempted, you know, oil and gas and potash, not least because even though that's actually the source of most of the U.S.'s trade deficit with Canada, which, Trump theoretically wants to erase, these are also products that they can't live without. And the reason that there's a trade deficit there is because Americans want all of this stuff from Canada and want to buy it. It also means that he's largely leaving Alberta and Saskatchewan untouched, you know, two provinces that aren't banning American liquor, while most of these tariffs will zero in on Ontario and Quebec, and particularly on the manufacturing stuff.

So it does seem that he's applying some pressure, at least in a regional way, to the extent that they've sort of thought that they've thought this kind of stuff through. They're trying to minimize the pain to their own economy, but we're still visiting some kind of pain on Canada. You mentioned that these new tariffs are in addition to existing tariffs on Canada, and I think it's probably worth reminding people where we're at here. So can you remind us of the tariffs that have already been imposed on Canadian goods? Just give us a kind of a brief overview here. Yeah, there are two sets of tariffs. So the ones that are really hitting Canada are the sectoral tariffs, specifically the ones on autos, steel and aluminum, and those have been in place since last

year. The tariffs on steel and aluminum are 50% for the raw product, or 25% for steel and aluminum components that are being imported. And then the tariffs on autos are 25%. Those are industries that Donald Trump cares deeply about. He explicitly wants all of the auto production, North America, to leave Canada and Mexico and come to the United States. You know, same thing with steel. an aluminum. So levying those tariffs is meant, you know, very much to hit Canadian and Mexican industry very hard. The second set of tariffs are the global baseline tariffs. And those are the tariffs that he's basically imposed on just about every country in the world. In Canada's case, and Mexico's as well, there's so far been an exemption for products that trade under the USMCA

from that second set of tariffs. And so consequently, those tariffs have not hit Canada quite as hard does they have the rest of the world? And notably in this new set of tariffs, the 50% tariffs announced on Monday, they will also apply across the board. There will be no exemption for things traded under USMCA. So, you know, electronic equipment, for instance, that presumably would have been USMCA compliant previously and therefore dodged the tariffs will now be subject to 50% tariffs, even if it is compliant with the trade deal. Do we know why we're seeing this new round of tariffs? Like, I know it's hard to know why Trump does what he does. But what do we know about the reasoning behind this new set of tariffs? So the reason that they're putting out there is Canada having retaliated on the U.S.

for the previous rounds of tariffs. So it's something that the U.S. administration has complained about for months where they basically said that only two countries in the world have retaliated against them during the trade war. One is China and the other is Canada. And so they're essentially punishing Canada for fighting back against. the U.S.'s previous tariffs. So that's their reasoning. They've complained repeatedly, especially about the provincial alcohol bans, that seems to have really bothered Trump administration officials. And the provinces, of course, have repeatedly said, well, these alcohol bans are only in place because of your trade war. As soon as the trade war is resolved,

and we have a trade deal, then we'll take the alcohol bans off. But before that, you know, we're not going to do that. So that's sort of the ostensible reason. In terms of the timing, why they're doing it now. We know that the U.S. formally declared on July 1st that it doesn't want to extend, renew the U.S.MCA. And so they're going to go into this protracted period of negotiations where there now will be annual reviews for the next 10 years until either USMCA expires in 10 years or until they reach a deal to renew it. And so this may be a negotiating tactic on the U.S.'s part to crank the pressure up a little bit. So essentially Trump has this policy of either you've face a bunch of tariffs from me that I sat at whatever I feel like, or you agree to these

deals where, you know, you will agree to certain punitive measures for me in exchange for my not making them even worse. And Canada has not agreed to such a deal. And so he's trying to ratchet the pressure up and put more tariffs on Canada to punish Canada, essentially. Right, right. So the timing is very interesting because of the talks around USMCA. So I want to spent a bit of time now to talk about how the administration is going about this new suite of tariffs. So they're using this legislation based on Section 338 of the U.S. Tariff Act, also known as the Smoot-Hawley Tariff Act. First off, what does this law allow Trump to do? Essentially what it says is that if the President of the United States determines that another

country is discriminating against U.S. products, so putting either tariffs or other non-tariff barriers on U.S. products that disadvantages the U.S. compared to other countries, then the president can respond by putting tariffs on that country's products up to 50%. There's nothing spelled out in the legislation in terms of what process the president has to go through for making this kind of determination, which is different from there are other trade statutes in the U.S. that have processes that the U.S. government has to go through before they put a tariff on. And there's no time limit. you know, this, this tariff can essentially be put on indefinitely at the determination of the President of the United States. So that's sort of open-ended language in this, in this section of

Smoot-Hawley. It's fairly clear why that would be attractive to Donald Trump that, you know, unlike, for instance, with Section 301 tariffs, so there's a whole process of having to do an investigation and do notice and comment, which is sort of like a public consultation process. And it can take months to essentially finish that process before you put the tariffs in place with with this section of Smoot-Hawley, the wording of the statute would seem to just require the president to make this determination, and then he can choose to put tariffs on up to 50%. Can we talk a little bit about the history of this act? Because that's quite interesting, right? So can give us a bit of a background of where this act comes from and why it's significant?

Yeah, so Smoot-Hawley itself, the larger piece of legislation that this is a part of was passed in 1930, near the start of the Great Depression. And the thinking at the time was that if you build this tariff wall around the United States, you can keep out foreign imports, help domestic industry, and then that will sort of revive the economy and avoid the worst of the Great Depression. The exact opposite essentially happened, whereby by building this tariff wall, the U.S. triggered a global trade war. Unemployment went up. Consumption, economic activity went down. You know, the economy massively contracted. You know, Smooth-Hawley today is sort of largely blamed for making the depression, you know, far, far worse than it needed to be. So that was sort of

smooth holly in general. This section 338 is kind of a, you know, I guess a subsidiary part of the legislation. According to one U.S. trade official that I spoke with who has done a bunch of research and into the history of this section specifically, the last reference that he could find in U.S. government documents before the Trump era to this section was in 1949 where there was a cable between Dean Atchison, who was then the Secretary of State, where he sort of floated that you could potentially use this to resolve a trade dispute with China or as leverage in resolving a trade dispute with China. After that, references to it essentially disappeared from the public record. The reason is that from the late 1940s onward, the U.S. and other

countries started to construct this kind of global rules-based order around international trade. And so it started with the general agreement on trade and tariffs in 1947, where went through to the World Trade Organization, plus a whole bunch of other subsequent free trade deals, including NAFTA. And so essentially, the statute became not particularly useful, but the problem that it was designed to solve in essentially pushing back against economic protectionism was now being solved by all these countries, kind of agreeing to rules, agreeing to dispute resolution mechanisms, and also agreeing to trade deals. And so the statute sort of became, you know, more abundant, you know, without ever having apparently been used aside from as a threat. But then,

2016, when Trump was elected the first time, he came to office with this promise of protectionism and larger to kind of roll back the march towards free trade of the previous decades. And so, you know, he and his advisors started sort of looking around for different statutes that they might be able to use to impose tariffs. And this is one that came up at the time that was discussed by Trump's advisors. In Trump's current term, he turned to AYPA to the International Emergency Economic Powers Act. and essentially use that to impose his first round of global tariffs. That was ruled unconstitutional by the Supreme Court earlier this year.

The other statutes that they were using a bit more cumbersome have a lengthier process. So I think that's probably what led him to Smoot Hawley to say, here's something that I can apply in this situation that doesn't have a cumbersome process involved, but that has so far not been struck down by the courts. We'll be right back. What do we know about Smoot-Hawley and how it might be challenged in court? Like, could it be challenged? Unlike Aipa, which does not explicitly talk about tariffs at all, but Trump interpreted to give him that power, you know, smooth holly is all about tariffs.

So that's one difference. The plain wording of the text does seem to suggest that the president has this power to, you know, impose tariffs so long as as he feels that other countries are discriminated against U.S. products. That said, you know, in conversations with a couple of trade experts yesterday, they outlined, probably about four different ways that you might be able to go about challenging this. So one thing that you might be able to argue is that this provision, as with All Smooth-Hawley, was sort of superseded by subsequent legislation. So, yeah, Congress never explicitly repealed Section 338, but they did pass a bunch of subsequent pieces of trade legislation that spelled out

the circumstances under which you're able to impose tariffs. And so you could argue that implicitly that sort of negates, you know, Section 338. Another argument we might be able to use is that the evidence on the public records suggests that in the 30s and 40s when the U.S. government was threatening to use or considering using Section 338, they did do investigations that they had the International Trade Commission go through a process in order to make this determination that U.S. products are being discriminated against. So you could argue that, okay, that isn't explicitly called for in the, the statute, but there has to be some sort of process for determining that a country is

discriminated against the U.S. and Trump hasn't followed any such process, you know, as far as we can tell. The other argument that you could make is that, you know, Congress can delegate some of its authority to the president to set tariffs, but it has to be relatively narrowly defined and that Congress doesn't, itself doesn't have the power to delegate an unlimited amount of power to the president to set tariff rates or to conduct or to conduct trade. And so you could try to argue that, you know, either this law itself or the way Trump is using it, you know, interprets Congress to have delegated the president a relatively unlimited amount of power to do this and Congress can't actually delegate. The final argument, in some ways maybe the one that

has the most concordance with the sort of whole intellectual argument against what Trump is doing in general, which is that the original purpose of Section 338 was to stop other countries from engaging in unilateral trade protectionism, not to punish other countries for retaliating when the U.S. itself engages in unilateral trade protectionism. So the argument would essentially be that when other countries behave badly, that's what Section 338 was intended to address. It was not intended to address a situation that the United States itself provoked through its own actions. So basically, it's like the retaliation against retaliation here, right? Is that kind of what we're talking about? Like, so the idea here is that like it was the U.S.

put on the tariffs and then Canada responded to that. So the retaliation, in fact, is because the U.S. put on the tariffs in the first place. Yeah, correct, correct. And the idea that Congress's intent in granting this power to the president was to address situations where some other country unilaterally decided to discriminate against U.S. products not to support the U.S. in taking its own unilateral trade actions, which is essentially what's happened here, where Trump has decided to launch this trade war and he wants to use this as another weapon. to prosecute that war. And the argument would be that, well, that was never the intention of Section 338.

It was basically about defending the U.S. from other people's trade wars, not helping the U.S. to prosecute trade wars of its own. Does the fact that Trump is using something that has never been used before, does that make it more difficult to be challenged? Will this be hard to challenge in court because maybe lawyers aren't very familiar with this? I think the last 10 years or so, there's been so much discussion over what Trump could or would use to impose tariffs that I do actually think that, you know, a lot of trade lawyers have now thought about this. I mean, maybe before 2016, they didn't think about it very much because, you know, aside from, you know, Ben Stein and Ferris Bueller's Day Off. In an effort to alleviate the effects of the anyone, anyone, the Great Depression passed the anyone, anyone, anyone? a tariff bill, the Holly Smoot Tariff Act, which anyone raised or lowered?

How many times did Smoot Hawley come up in the decades after it, it sort of became obsolete? You know, but since 2016, certainly, you've had a lot of discussion around, you know, okay, Donald Trump loves tariffs. He wants to put tariffs on as many people as possible for, you know, pretty much any reason that he can think of. You know, didn't act as much on that in his first.

first term, though he did some of that, but in a second term, certainly, he was trying to prosecute that sort of agenda. And so I think trade lawyers have sort of tried to think through the different statutes that he could use and how you might go about challenging them. And so I think there has been a fair amount of thought put into, at least by people within that sort of narrow circle, into Section 338. On the administration side, most likely they'll just lean on the plain text of the statute and the fact that if you just read, you know, at least as a layman, if you read the plain wording of the statute, it does seem to give the pressure. has it had, you know, pretty broad power to do what Trump wants to do here.

So, Agent, we've kind of laid out like the mechanics here of these new terrorists, but I'm curious about the reaction from, from U.S. politicians and what might be the reaction, too. So how have we seen U.S. politicians respond to this latest escalation? Certainly less discussion on this in the U.S. and in Canada, but there have been some, Gavin Newsom, for instance, the governor of California, he came out and sort of mock Donald Trump over this, said that Trump was putting tariffs on Canada because he accuses Canada of not raking its forests, you know, sort of making fun of Donald Trump for being upset with Canada over the wildfire smoke that's blown into the U.S.

This whole thing about raking forests is something about that's taking care of the forest floor. Yeah, yeah, that's right. And, you know, and it's mockery that comes from a place of, you know, Gavin Newsom has been the target of the same kind of stuff from Trump, where Trump over the years has repeatedly accused California of not clearing enough underbrush from its forests. You know, he accused Gavin Newsom of not allowing water to go to put out fires. You know, things that are, you know, flatly untrue, but, you know, Newsom was sort of taking advantage of that to kneel Trump a little bit.

You know, one risk that Donald Trump is taking here is that a lot of states, including states with some swing congressional districts and Senate races, do a lot of business with Canada. Michigan obviously has a big Senate race this year, has a heavily integrated auto industry across the border. Pennsylvania, which is one of the few states in the U.S. that is not terribly gerrymandered, has a number of very competitive congressional districts that can turn on one or two percent of the vote. And so, you know, in the midterm elections, Trump is taking a risk. More broadly, Donald Trump has been hammered on the affordability issue for the last year, even though the blast radius of the tariffs is relatively narrow, if it becomes a narrative that

Donald Trump is just doing thing after thing after thing that are going to drive up your costs, your prices that are going to cause economic drag, you know, at a time when people are feeling a lot of economic anxiety, you know, that's potentially going to hurt him. What's been the response from Ottawa? Mark Carney said that he spoke with Donald Trump on Tuesday the day after Trump unveiled these tariffs and that they agreed to intensify their talks around trade. So Carney so far seems to be sort of doing the obvious thing. You know, if this is indeed just sort of a method of ratcheting up the pressure because Donald Trump wants a deal, he's saying, okay, let's sit down and make a deal.

Let's keep talking. There have been calls from provincial premiers for for Carney to respond in kind. Doug Ford said that if the new tariffs do go into effect on August 19th, that that Carney should respond with dollar-for-dollar tariffs. You know, Carney has essentially said he's not made a decision on that yet, so he's not ruling it out, but he's certainly not sort of making those kinds of threats himself. Sort of consistent with how Carney, I think, has managed all of this from the beginning. On one hand, he has made concessions to Donald Trump. He reduced Canada's retaliatory tariffs, for instance, on a couple of occasions.

He canceled the plan digital services tax at Donald Trump's demand. he agreed to share a toll revenue from the Gordi Howe Bridge, even though Canada paid for the entire thing. So on one hand, Carney has tried to appease Trump. At the same time, he has certainly gone further towards standing up to Trump than most world leaders have. You know, most many leaders, for instance, Kirstarmer, the now former Prime Minister of the United Kingdom, you know, the European Union signed these kind of punitive trade deals with Donald Trump. And Carney so far, you know, has not, has not done that. And as the Americans, you know, love to mention Canada and China are the only two countries to actually take retaliatory measures

against the U.S. So. And perhaps reasoning why we are seeing these new tariffs in the first place. Yeah, absolutely. I mean, absolutely. That's, that's one of the things that they constantly cite in the Trump administration. So, so yeah, on one hand, Cardi has certainly stood up to Donald Trump in a way that other world leaders have not. But at the same time, he's been cautious about how he's done it. has been certainly willing to, you know, to capitulate to Donald Trump when he thinks that it's necessary to avoid further pain for Canada. So, Adrian, just to end here, Trump has actually signaled that there may be even more tariffs on Canada, this time over wildfire smoke.

And then there's also reports that there could be new tariffs coming for other countries as well. What does this all say about the Trump administration's strategy? What it all says is that Donald Trump has described himself as a tariff man. And that's an absolutely factual statement. You know, since the days of Smooth Holly in the 1930s, really the only times you get serious politicians at that level supporting tariffs is when they want to use them in a very sort of limited way to achieve some kind of tactical purpose, you know, to gain leverage in a negotiation or to disincentivize a very specific action by a trading partner and they disagree with. you know, what's different about Donald Trump is that, yes, he uses tariffs in that sense, but far, far more than that, Donald Trump just thinks tariffs are good economic policy.

You know, Donald Trump's head is in the same place as the crafters of Smoot-Hawley. It's in the same place as, you know, William McKinley in the 1890s, you know, with the McKinley tariff. And Lutnik has made comments this effect as well. You know, these are people who sincerely believe that the best way to manage the U.S. economy is to build a tariff wall around it, try to bring. as much manufacturing, especially heavy manufacturing back into the United States as possible, and that this is going to lead to a wonderful economic future for the country that looks something like the 1890s. So there will always be these sort of discussions about, oh, is Donald Trump

just doing tariffs for this or that tactical purpose in a negotiation? Sometimes, yeah. You know, is Donald Trump doing tariffs because he's, you know, deeply concerned about Canadian forest fires or about fentanyl coming across the border or about national security or about forced labor practices? Maybe, but I think the broader explanation for why Donald Trump does these things is because Donald Trump loves tariffs,

and you just don't have to look that far to see how true that is. And the fact that he wants to hit as many countries as possible and as many products as possible with as many tariffs as possible because that's his vision for the economy. Adrian, we'll leave it there.

Thank you so much. Thanks so much for having me. That was Adrian Morrow, the Globe's U.S. correspondent in Washington, D.C. That's it for today. I'm Cheryl Sutherland. Ali Graham produced this episode. Our producers are Madeline White, Rachel Levy McGoughlin McLaughlin and Mahal-Stein. Our editor is David Crosby.

Adrian Chung is our senior producer, and Angela Pichenza is our executive editor. Thanks so much for listening. Thank you.