A 1930 statute nobody had used is now setting tariffs on Canada. Friday's CPI will barely register it.

by Alina Castellanos · September 9, 2026

Economics Correspondent, US Market Current

The August consumer price report arrives Friday, Sept. 11 at 8:30 a.m., per the Bureau of Labor Statistics release schedule, and it will be read as a verdict on tariffs. On the newest and largest set of tariffs, the North American ones, it is very close to no verdict at all, for a reason that has nothing to do with economics and everything to do with the calendar.

The new duties on Canada were imposed under Section 338 of the Tariff Act of 1930, codified at 19 U.S.C. § 1338, a provision that lets the President impose tariffs of up to 50 percent on a country he finds discriminates against US commerce relative to other trading partners. A July 20 White House fact sheet announcing the action described the authority as empowering the President "to impose tariffs when a country disadvantages U.S. exporters relative to the exports of another country to offset the disadvantage or burden on U.S. commerce," and cited Canadian measures on motor vehicles, alcoholic beverages and dairy.

What makes this unusual is not the rate. It is the statute. A July 29 alert from Holland & Knight, by Peter Tabor, Molly B. O'Casey, Ashley Akers, Andrew K. McAllister, Patrick T. Childress and Sophie Jin, states flatly that "[t]his marks the first time Section 338 has ever been used to impose tariffs." A subsequent Covington & Burling analysis reached the same conclusion, noting that while the US government threatened its use several times before 1949, the statute has effectively sat unused for more than 75 years, and calling the 2026 action the first time in modern history it has been invoked to impose tariffs.

The reason it was reached for now is the more consequential detail for markets. The Holland & Knight alert notes that Canada had been subject to a 35 percent tariff on non-USMCA-compliant products under the International Emergency Economic Powers Act until, in that alert's account, those tariffs were found unlawful by the US Supreme Court. Section 338 is the replacement authority. It comes with its own legal exposure: the same alert lists open questions over whether Section 301 of the Trade Act of 1974 superseded Section 338 and whether the International Trade Commission must investigate first, and anticipates litigation in the US Court of International Trade.

Covington's analysis makes the same point from the other side, describing Section 338 as conferring significant discretion on the President to impose tariffs without first undertaking the investigatory and administrative steps required under many other statutes. That discretion is what made it usable quickly. It is also what makes the outcome of any challenge genuinely uncertain, which is a different risk profile from a tariff that has already survived review.

The mechanics matter for anyone modelling pass-through. Holland & Knight reads the proclamations as carving out goods already subject to Section 232 duties, which covers steel, aluminum, copper, vehicles, certain wood products, semiconductors and pharmaceuticals, while applying on top of other regimes such as Section 301. Covington's reading emphasises that the duties generally apply in addition to existing tariffs. Both note that USMCA origination does not exempt covered goods, which is the break with the prior framework: a good can be fully North American in origin and still pay the full 50 percent. Covington records one narrow exception, for certain passenger vehicle parts.

The White House fact sheet lists the exclusions as energy, potash, Section 232-covered goods, fish and critical minerals, with covered goods ranging, in its own description, from wine to hockey sticks to cement. Holland & Knight counted three proclamations covering motor vehicles, alcoholic beverages and dairy, with the vehicles proclamation the broadest at 439 traded lines spanning agricultural products, textiles, wood products, cement, furniture, consumer goods and select machinery and electrical equipment, and the dairy proclamation running to roughly 52 classifications covering milk, cream, whey, lactose and casein.

Estimates of the value differ depending on who is counting. Holland & Knight put it at nearly $20 billion of Canadian imports; a July 21 CSIS analysis by Christopher Gundermann, Hugh Grant-Chapman and Diego Marroquin Bitar used roughly the same figure and calculated it as 4.9 percent of total US imports from Canada in 2024. Canada's own Department of Finance describes the US action as a 50 percent tariff on $27.6 billion of Canadian goods effective Aug. 22.

Now the timing. The action was announced July 20 with an effective date of Aug. 19, then pushed three days to Aug. 22, according to Covington's account. Duties that took effect at 12:01 a.m. on Aug. 22 were in force for the last ten days of August, and only for goods that cleared customs, moved through distribution and reached a shelf inside that stretch. Nor is the exposure a simple ten thirty-firsts of the month: the BLS Handbook of Methods describes food at home, energy and selected other items as priced monthly, along with all commodity and service items in New York, Los Angeles and Chicago, while elsewhere the remaining commodity and service items are priced bimonthly, assigned to even- or odd-numbered months. A good deal of the August sample was therefore taken before the duties existed. Whatever Friday's report shows on core goods, it is not a clean measurement of these tariffs. October's report, covering September, is the first full month.

The baseline Friday will be measured against is a soft one. In the July report released Aug. 12, BLS put the all-items index up 0.1 percent on the month and 3.4 percent over 12 months, with core, all items less food and energy, up 0.2 percent on the month and 2.5 percent over the year. Shelter rose 0.1 percent and accounted for roughly two-thirds of the monthly all-items increase. Within core goods, apparel rose 0.1 percent on the month and 3.9 percent over the year, new vehicles rose 0.1 percent and just 0.5 percent over the year, used cars and trucks rose 0.4 percent but were down 1.9 percent annually, and household furnishings and operations were up 2.2 percent over 12 months. Energy fell 1.5 percent on the month while remaining up 14.7 percent over the year, driven by gasoline.

The categories where these particular duties would show up in a consumer price index are narrow: dairy, alcoholic beverages, furniture and furnishings, some apparel and textiles. Cement, industrial machinery and filtering equipment parts are real costs to real businesses and are largely absent from the consumer basket, which means they surface later, if at all, and in producer prices first.

Canada's response, which took effect at 12:01 a.m. on Sept. 8, does not enter US consumer prices by this route at all. The Department of Finance describes counter-tariffs on $27.6 billion of US imports at rates of 15, 25 and 50 percent, set to match the US rate on the equivalent good, covering steel, dairy, appliances, agricultural equipment, pulp and paper and electronics. Covington counted more than 600 product categories. Those duties are paid by Canadian importers on American exports. Their effect on the United States runs through export volumes, corporate revenue and eventually employment in the affected industries, not through the price an American household pays at the register.

That distinction is worth holding onto over the next several data cycles. A US tariff is a tax collected on imports that can raise domestic consumer prices. A foreign retaliatory tariff is a demand shock to US producers that does not. They arrive in the same headlines and land in entirely different parts of the national accounts, and conflating them is the easiest way to misread what a single CPI print is actually telling you.