Trump administration consults unused 1930s law for tariff playbook

The Trump administration keeps finding new ways to wage trade wars. As one novel tariff authority nears its expiration, it's testing another — threatening huge duties on Canadian goods under a never-before-used law.Why it matters: The administration's willingness to test new trade authorities makes tariff policy harder for businesses, investors and foreign governments to handicap.It's hard to know which will survive challenges in the courts, and over what time horizon there may be any resolution.Even if individual tariffs are delayed or struck down, the administration can still use the threat of them to gain negotiating leverage while forcing companies to plan for higher costs.It's unfolding even as renewed conflict in the Middle East pushes up energy costs and inflation risks — a backdrop that many economists thought would discourage the White House from opening new trade war fronts.Driving the news: The White House says the tariffs respond to what it considers Canadian discrimination against U.S. autos, dairy and alcohol. The administration invoked the never-before-used Section 338 of the 1930 Smoot-Hawley Tariff Act and chose the maximum penalty allowed by the law: 50% duties, applied to roughly $20 billion of Canadian imports starting in August.The duties would raise the average tariff rate on Canadian goods by roughly 2.3 percentage points, according to Karl Schamotta, Corpay's chief market strategist.Between the lines: Section 338 is the latest legal authority the administration has reached for after courts earlier this year narrowed its emergency tariff powers.The White House quickly replaced many of those invalidated tariffs with a 10% global levy under Section 122 — another never-before-used authority that happens to expire on Friday.A federal trade court later struck down the Section 122 tariffs, though an appeals court allowed them to remain in effect pending appeal.As that authority fades, the administration is replenishing its arsenal with more traditional trade laws. Top Trump trade official Jamieson Greer told CNBC on Tuesday morning to "expect to see some action soon" from a forced-labor investigation expected to produce tariffs on dozens of countries.What to watch: Trade lawyers suggest the latest Canadian tariffs are also likely to face legal scrutiny — that is, if they take effect.Peter Harrell, a visiting scholar at Georgetown Law's Institute of International Economic Law, wrote on X on Monday night that a potential challenger could argue that the administration bypassed the required procedures to impose the tariffs.Ilya Somin — who helped successfully challenge President Trump's International Emergency Economic Powers Act tariffs — wrote that Congress "superseded" Section 338 through later trade legislation, leaving it without independent authority to impose new tariffs.The other side: A senior administration official argued Section 338's "terms are clear" and said Canada's retaliation and preferential treatment of third coun