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President Trump is poised to revive a largely dormant 1930 trade law as the foundation for his new reciprocal tariff strategy, which aims to match higher import taxes imposed by other nations, according to experts in trade and law.
The president’s plan to implement these new tariff rates with minimal delay could be facilitated by Section 338 of the Trade Act of 1930, a rarely invoked provision that has never been used to actually impose tariffs.
This law empowers the president to levy duties up to 50% on imports from nations deemed to discriminate against American commerce. Such discrimination can include unreasonable charges or regulations not uniformly applied to all countries, or any customs duties that put U.S. trade at a disadvantage.
🚨🇺🇸TRUMP PLANS MASSIVE TARIFFS USING A FORGOTTEN 1930 LAW
He is dusting off Section 338 of the Trade Act of 1930 – a nearly century-old law – to impose tariffs on countries with higher import taxes on U.S goods.
The law, which allows tariffs of up to 50% on discriminatory… pic.twitter.com/CKAf0YcR2x
— Alex Kennedy (@therealmindman) February 12, 2025
Trump has repeatedly expressed frustration over America’s lower tariff rates compared to other nations, particularly citing the European Union’s 10% tax on automobiles, which significantly exceeds the U.S. rate of 2.5% on passenger vehicles.
“I think that is exactly the path that they’re going to follow,” Dan Cannistra, a partner in the Crowell & Moring law firm, said of Section 338. “They’re going to tell the EU: ‘You’re giving Korea 0% on cars, you’re giving 10% to the U.S. You’re discriminating against us.'”
Unlike the lengthy processes required by Section 232 national security provisions and Section 301 unfair trade practices law, which Trump employed during his first term, Section 338 allows for swift implementation. The president recently demonstrated his preference for immediate action by utilizing the International Emergency Economic Powers Act to impose tariffs on Chinese goods and set deadlines for Mexican and Canadian tariffs related to fentanyl concerns.
Nazak Nikakhtar, formerly of the Commerce Department and now with Wiley Rein law firm, explains that Trump’s previous administration had explored Section 338 scenarios but opted for more conventional approaches. “The conclusion was that it was a valid law. Congress could have repealed it, but it didn’t,” Nikakhtar said. “Its benefit is that it’s more immediate.”
The law’s historical context is significant, as it’s part of legislation that economists believe contributed to the Great Depression through escalating tariff increases and retaliatory measures. Post-World War II efforts to standardize global tariff rates led to the establishment of Most Favored Nation (MFN) rates under international trade agreements.
Trump Pledges To Lower The Trade Deficit With Passage Of The Trump Reciprocal Trade Act, Which Will Match Tariff Rates That Are Imposed By All Outside Countries.
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John Veroneau, a former deputy U.S. trade representative, suggests that implementing Section 338 tariffs would fundamentally disrupt the MFN system. “It would be an earthquake in Geneva to announce U.S. intentions to move away from unconditional MFN and negotiate our tariff schedules on a bilateral basis,” he said.
The scope of Trump’s intended action remains unclear, but it’s expected to focus on addressing disparities between U.S. tariffs and those of other nations. White House economic adviser Kevin Hassett highlighted India’s restrictive tariffs as an example of the imbalances Trump seeks to address.
WTO data shows the U.S. trade-weighted average MFN tariff rate at 2.2%, considerably lower than India’s 12%, Brazil’s 6.7%, and Vietnam’s 5.1%. Legal experts believe Trump’s use of Section 338 could withstand challenges due to existing inconsistencies in international tariff systems.
Beyond tariff differentials, the administration might also target regulatory practices that disadvantage U.S. products, such as restrictions on genetically modified crops or vehicle standards in the EU and Japan, according to Nikakhtar.
