Section 338 of the Tariff Act: Trump's tariffs challenged in court, what are the implications for the auto industry in Canada?
A new judicial battle in the United States could impact trade relations with Canada. On October 20, 2026, an American company initiated a legal proceeding to challenge the 50% tariffs imposed on certain Canadian products. At the heart of the dispute: Section 338 of the 1930 Tariff Act, a rarely used provision. As trade tensions continue to burden the North American auto industry, one question arises: could this legal action influence car prices in Canada?
Section 338 Tariff Act Challenge: why are U.S. tariffs being contested?
On October 20, 2026, the American company Gellert Global Group, specializing in the import of food products, filed a lawsuit before the U.S. Court of International Trade.
The company contests the use of Section 338 of the 1930 Tariff Act by the Trump administration to impose 50% duties on some products from Canada.
According to the plaintiffs, the American government exceeded the authority granted to it by legislation by using this provision to establish new trade barriers.
This proceeding could have consequences extending well beyond the food sector. Trade tensions between the U.S. and Canada also concern the auto industry, one of the most economically integrated sectors in North America.
For automakers, suppliers, and Canadian consumers, how this matter evolves is therefore an important subject to watch.
What is Section 338 of the 1930 Tariff Act?
Section 338 is part of the 1930 Tariff Act, an American law also known as the Smoot-Hawley Tariff Act.
This provision allows the President of the United States, under certain conditions, to impose additional duties of up to 50% on imports from countries deemed to practice discriminatory trade against the U.S.
In 2026, the Trump administration invoked this provision in its trade dispute with Canada.
Washington, in particular, criticizes the Canadian government for certain practices regarding market access to American products, including automobiles.
For its part, Ottawa defends its trade measures as responses to U.S. restrictions.
The legal challenge thus raises a fundamental question: can a law adopted nearly a century ago still justify such significant trade sanctions in today's economic context?
The answer will depend on the interpretation of U.S. courts.
Why is the Canadian auto industry concerned?
The auto industry is a cornerstone of trade between Canada and the U.S.
For several decades, the two countries have developed closely linked production chains. A car assembled in Canada may integrate engines, electronic components, or parts made in the U.S. or Mexico.
Some auto parts even cross borders several times before their final assembly in a vehicle.
Manufacturers like Ford, General Motors, Stellantis, Toyota, and Honda depend on this North American industrial organization.
The introduction of new tariffs potentially complicates these exchanges.
When imports become more costly, companies must adapt their strategies: absorb the additional costs, change suppliers, reorganize production, or raise some prices.
Even when a tariff measure does not directly target an automobile, it can contribute to degrading the business climate in which automakers operate.
This is why the challenge to Section 338 sparks particular interest in the context of economic relations between Ottawa and Washington.
Car tariffs: beware of confusing Section 338 with Section 232
It is important to clarify that U.S. tariffs targeting automobiles do not all stem from Section 338.
The U.S. has also adopted 25% sectoral tariffs on certain imported cars and trucks, based on Section 232 of the 1962 Trade Expansion Act.
These measures have their own legal basis.
Specific provisions apply to vehicles meeting the requirements of the Canada–United States–Mexico Agreement, better known as CUSMA.
Thus, even if the U.S. courts sided with companies challenging Section 338, tariffs established under Section 232 would not automatically vanish.
This distinction is essential to understand the true potential consequences of the trial.
A legal victory might reduce some trade restrictions, but it wouldn't necessarily mean the end of all car tariffs between the two countries.
Could car prices in Canada increase?
For Canadian consumers, the main concern is obviously prices.
In Montreal, Laval, Quebec City, Toronto, or Vancouver, buying a car is already a significant expense. Trade tensions could add new pressures on the cost of certain vehicles.
When a manufacturer has to pay more to import components or vehicles assembled abroad, several possibilities arise.
They may decide to absorb the extra costs to retain their customers. They may also reorganize their supply chain or pass part of these expenses onto the consumer.
For example: if making or importing a vehicle becomes $2,000 more expensive, the manufacturer might decide to reflect part of this increase in its sale price.
However, the consequences vary significantly from one model to another.
Assembly location, origin of parts, applicable trade rules, and manufacturers' pricing strategies all play a role.
Therefore, it would be incorrect to assert that all vehicles sold in Canada will automatically face the same price increase.
Montreal and Laval: what impact for Quebec motorists?
In Quebec, the consequences of a car trade war could manifest in different ways.
A Montreal motorist wishing to buy a family SUV, a hybrid sedan, or a pickup may choose from models produced in Canada, the U.S., Mexico, or elsewhere.
However, these vehicles aren't necessarily subject to the same import conditions.
Manufacturers with highly integrated North American activities could encounter particular difficulties when trade rules change rapidly.
Dealers, meanwhile, must deal with manufacturers' pricing decisions, transport costs, available stocks, and financing conditions.
The used car market might also be indirectly influenced.
If certain new vehicles become less financially accessible, more consumers might turn to used models, increasing demand.
However, this doesn't necessarily mean a price hike is inevitable. Several factors, including the exchange rate of the Canadian dollar, competition, and stock evolution, will continue to influence the market.
Ford, GM, Stellantis, and Toyota: automakers under pressure
Trade tensions between the U.S. and Canada pose a challenge for major automakers.
Ford, General Motors, and Stellantis operate industrial networks spanning multiple North American countries.
Toyota and Honda also have significant production activities in Canada.
These companies have long benefited from an integrated market that allows distributing assembly and parts manufacturing activities across different territories.
However, the increase in tariffs can alter the economic balance of this organization.
Automakers must then consider new trade barriers when planning their investments, supply chain, and future models.
For Canada, the stakes are particularly high.
The auto industry supports tens of thousands of direct jobs and is a major component of Canadian manufacturing exports.
A prolonged deterioration in trade relations could therefore affect far more than the prices displayed in showrooms.
Could Canada benefit from a legal victory against U.S. tariffs?
If U.S. courts ruled that the Trump administration overstepped its powers by using Section 338, certain tariffs could be canceled or suspended.
Such a decision could ease the costs borne by affected businesses and help reduce some trade tensions.
For Canadian manufacturers, this could be a positive signal.
However, several uncertainties remain.
A possible court decision could be appealed. Its enforcement would also depend on the exact scope of the judgment.
Moreover, Washington could maintain other tariffs based on different legal provisions.
The potential removal of contested tariffs would not guarantee an immediate return to unrestricted trade or an automatic decline in car prices in Canada.
Should you wait before buying a new car in Canada?
For a consumer considering vehicle purchase, it might be tempting to delay the decision hoping for upcoming tariff reductions.
Yet, the outcome of the legal challenge remains uncertain.
The price of a car depends on numerous parameters not directly related to tariffs: interest rates, manufacturers' promotions, exchange rates, financing costs, transport, and model availability.
Thus, a Quebec buyer should compare offers from several dealers, ask for the vehicle's total price, and consider different financing solutions.
It might also be helpful to verify a model's assembly location, without assuming that this information alone determines its tariff treatment.
The evolution of the trade conflict warrants observation, but it shouldn't be the sole criterion in a car purchase decision.
Section 338: what scenarios for the coming months?
Several developments are possible in this case.
In the first scenario, the courts could side with companies challenging the new tariffs. Some measures could then be suspended or invalidated.
In a second scenario, the judiciary could uphold the legality of using Section 338, allowing the concerned tariffs to remain.
Finally, an intermediate decision could limit certain application modalities without challenging the entire framework.
Regardless of the trial's outcome, automotive trade relations between Canada and the U.S. will continue to be influenced by other tariff measures and economic negotiations between the two governments.
For automakers, the predictability of trade rules remains a critical factor in industrial decisions.
Conclusion: an American lawsuit deserving Canadian motorists' attention
The challenge to Section 338 of the Tariff Act marks a new phase in trade tensions between Canada and the U.S.
Even though the legal action of October 20, 2026, was initiated by a company specializing in food imports, its context extends far beyond this sector.
The Canadian auto industry, heavily reliant on cross-border trade, remains particularly sensitive to economic decisions made in Washington.
For consumers in Montreal, Laval, Toronto, and the rest of the country, the potential consequences might translate into changes in production costs, the availability of certain models, or manufacturers' sales strategies.
However, it would be premature to announce a general decrease or increase in car prices following this procedure.
One question remains open: will the challenge to Section 338 help ease trade tensions, or will the North American automotive industry have to continue adapting to an uncertain tariff environment?
Frequently asked questions about Section 338 and the auto industry in Canada
What is the Section 338 Tariff Act Challenge?
It is a legal challenge against the use of Section 338 of the 1930 Tariff Act by the American administration to impose additional tariffs on certain Canadian products.
Why are U.S. tariffs being contested?
The plaintiffs argue that the Trump administration exceeded its legislative powers by using this provision to establish new tariffs.
Could American car tariffs disappear?
A potential cancellation of tariffs based on Section 338 would not automatically eliminate automotive duties enforced under Section 232.
Will cars become cheaper in Canada?
No general decrease in prices can be assured. Car prices depend on production costs, exchange rates, financing conditions, and manufacturers' sales strategies.
Which manufacturers could be affected?
Ford, General Motors, Stellantis, Toyota, and Honda are among the manufacturers with significant industrial activities in North America. The specific consequences will depend on the tariff measures applied to each company and its products.
Why is this issue important for Quebec?
Quebec has significant economic relations with the rest of North America. Changes affecting automotive supply chains can impact certain Quebec suppliers, dealers, and consumers.