The escalating trade war between the United States and Canada has placed Texas exporters in a difficult position, as President Donald Trump invoked a 96-year-old statute to impose 50% tariffs on $20 billion worth of Canadian imports. The move, which drew dollar-for-dollar retaliation from Ottawa, has raised legal questions and economic concerns across the state.
Trump invoked Section 338 of the Tariff Act of 1930, a provision so obscure that many trade lawyers were unaware it remained on the books. The law has never been used or tested in court, creating significant uncertainty about whether the tariffs could survive a legal challenge. Ryan Majerus, a partner at King and Spalding and former U.S. trade official, told AP News that the law is literally a blank canvas because it has never been litigated.
For Texas, the trade dispute has tangible economic consequences. Canada is one of the state’s largest trading partners, with bilateral trade encompassing energy products, agricultural goods, machinery, and manufactured items. Texas exports to Canada support tens of thousands of jobs across the state, particularly in the petrochemical, agriculture, and technology sectors. Tariffs imposed by both countries raise costs for businesses that depend on cross-border supply chains and threaten to reduce demand for Texas products in the Canadian market.
The historical parallel is uncomfortable. The 1930 Tariff Act, known as the Smoot-Hawley Act, is widely regarded by economists as having worsened the Great Depression by triggering retaliatory tariffs from trading partners. Most historians view it as a policy mistake that deepened an already devastating economic crisis. Trump, however, has cited the era as evidence that high tariffs can protect American interests, as AP News reports.
The conflict has also taken on a symbolic dimension. Trump signed an executive order renaming Lake Ontario as Lake America in the United States, a move met with mockery from Canadian leaders. Ontario Premier Doug Ford responded with a billboard-sized message on the Canadian shoreline reading Lake Ontario Now and Always, according to AP News. Google subsequently updated its Maps application to show Lake America for U.S. users.
The economic impact on Texas businesses is already being felt. Companies that import Canadian lumber, energy products, or components face higher input costs, while those exporting to Canada confront retaliatory tariffs that make their products less competitive. A Michigan furniture manufacturer told AP News that the tariffs will hamper the ability to put food on the table, a sentiment echoed by businesses in similar cross-border supply chain arrangements across the Southwest.
Trade lawyers note that Section 338 may be rendered obsolete by more recent trade legislation, including the U.S.-Mexico-Canada Agreement (USMCA). If the tariffs are challenged in court — and legal challenges are expected — the outcome could redefine presidential tariff authority and the legal framework governing North American trade. For Texas businesses, the uncertainty itself is a cost: investment decisions are being delayed, supply chain arrangements are being reconsidered, and hiring plans are on hold until the trade landscape stabilizes.
