Lawsuit Challenges Trump's Use of 1930s Law for Canada Tariffs

A federal lawsuit filed Tuesday in the U.S. Court of International Trade challenges President Trump's 50% tariffs on Canadian goods. The suit, brought by New Jersey-based food importer Gellert Global Group, argues Trump exceeded his executive authority by using Section 338 of the Tariff Act of 1930, a statute never before used to impose tariffs in its 96-year history.

The legal action targets tariffs enacted in July on roughly $20 billion worth of Canadian goods. It contends the administration failed to identify adequate justification under Section 338, which allows a president to levy tariffs of up to 50% in response to another country's discrimination against U.S. commerce. The lawsuit asserts the statute is superseded by more modern trade laws and that Trump improperly applied it by targeting products unrelated to alleged Canadian discrimination. The complaint asks the court to declare the tariffs unlawful, block their enforcement, and order refunds of duties already paid with interest.

Tariff impact on manufacturing supply chains

The lawsuit highlights how the 50% tariffs have disrupted detailed cross-border manufacturing processes. Gellert Global Group, a family-run business with over $1.7 billion in annual revenue, now pays a 50% duty on the entered value of its Canadian cheese imports. This amounts to an estimated $40 million per year for the company, which imported $71 million worth of Canadian cheese in 2025, including varieties like brie, camembert, mascarpone, and sheep's and goat's milk cheese.

The company's supply chain illustrates the integrated nature of North American manufacturing. For certain cheeses, Gellert's Canadian supplier sources milk from Upstate New York dairy farmers, processes it into products like brie in Canada, and then ships the finished goods back to the United States. The company warns that sustaining the tariff costs, which it has absorbed through the end of the year, is not feasible long term. Continued tariffs will force price increases, leading to lost sales, reduced customer loyalty, risk of losing product placements, and significant supply chain interruptions.

Legal precedent and prior court rulings

This case builds on a series of court rulings that have pushed back against presidential use of emergency powers for tariffs. In February, the U.S. Supreme Court ruled it was unconstitutional for Trump to use the International Emergency Economic Powers Act for tariffs, affirming that the Constitution gives Congress power over tariffs. Following that, the Court of International Trade ruled in May that a temporary 10% tariff Trump instituted after the IEEPA decision was illegal. The Trump administration is appealing that ruling, though the levies have since expired.

The current lawsuit raises concerns that upholding Section 338 could allow any president to impose tariffs without congressional control. The Liberty Justice Center, which represents Gellert, previously successfully contested Trump's 'reciprocal' tariffs. The center is currently engaged in two other lawsuits against Trump's use of laws to impose sweeping tariffs.

Industry concerns over cost and sustainability

For Gellert Global Group, the tariffs represent a severe financial strain and operational threat. The company states it paid no tariffs on Canadian cheese imports under the USMCA trade agreement. The dairy quota terms in that pact actually give American cheese better access to Canada than most of the world receives. The lawsuit argues the Canadian policies cited by the White House-including provincial liquor bans and auto quotas-do not justify sweeping tariffs. It notes that two of these measures were actually retaliatory responses to Trump's own earlier tariff actions, which the Supreme Court has held unlawful.

The trade dispute escalated after talks broke down in August. Trump initially announced the levies in late July. When negotiations fell apart the day before the tariffs took effect on August 22, Canada implemented retaliatory 'dollar for dollar' tariffs of up to 50% on U.S. imports in September. In response, Trump expanded the list of goods subject to the 50% tariff, adding specialty cheeses and instituting import bans on products like motorcycles and beer. Gellert is also subject to Ottawa's retaliatory tariffs on American-made cheeses sold in Canada.

The White House claims Section 338 empowers the president to act when a country puts U.S. exporters at a disadvantage, citing Canada's supply-managed dairy system and quotas on certain U.S. vehicles. However, Canada's dairy supply management policies are agreed to under the CUSMA trade deal, negotiated during the first Trump administration. The lawsuit will proceed through the Court of International Trade with potential appeal to the Federal Circuit, while the administration continues defending its Section 338 authority in ongoing tariff cases.