Section 338 and the Ghost of Smoot–Hawley

Part One of a Three-Part Series on Section 338

The Real Tariff Tools in a Post-IEEPA World

The Supreme Court may soon decide whether presidents can continue using IEEPA as an all-purpose tariff machine. If the Court rules against that practice, it will limit a tool that has become a convenient shortcut. 

The executive branch has grown comfortable reaching for IEEPA whenever it wants to reshape trade policy at scale. A restriction on that habit would force the administration to revisit the older statutes that were designed for a very different century.

This is why Section 338 has found itself in the news. Commentators are reminding everyone that the Tariff Act of 1930 still contains an intact delegation of power that lets the President retaliate against foreign discrimination with higher duties or quantitative restrictions. 

Before the trade community declared Section 338 an antique, Congress placed it inside Smoot-Hawley for a reason. The statute built an entire tariff architecture. One part belonged to Congress. Another part belonged to the President. 

Both parts remain in force. 

Only one part is available without a new act of Congress.

Most coverage frames Section 338 as a forgotten tool that might soon become relevant. That is accurate, although not complete. To understand how a president might respond in a post IEEPA world, it helps to revisit the statute that created both the high statutory tariff column and the retaliation mechanism. 

The two halves still work together, although they serve different masters.

The Smoot-Hawley Foundation

Smoot–Hawley is broadly regarded by economic historians as having exacerbated the Great Depression by encouraging retaliatory tariffs at a fragile moment in global trade. 

The modern HTSUS retains structural remnants of the tariff architecture created in 1930, including the higher Column 2 duty rates applied to countries without normal trade relations with the United States. These duties represent the highest standard statutory tariff rates in the schedule. They currently apply to a small set of countries without normal trade relations with the United States: North Korea, Cuba, Russia, and Belarus. The rates are heavy enough to discourage imports entirely. That was the point when Congress wrote them.

Column 2 is pure legislative power. Only Congress can place a country in that category. Only Congress can alter those rates. When analysts talk about moving China into Column 2, they are really talking about the votes required to pass a statute. No president can do it alone. That distinction is important, because it clarifies what is and is not possible if the Court trims IEEPA authority.

The Presidential Tool That Survived

Section 338 is the part of Smoot-Hawley that Congress delegated to the executive branch. 

The authority is simple. If another country discriminates against American commerce, the President may raise duties or restrict imports from that country. The retaliation can be severe. Although 338 expressly caps retaliatory tariffs at 50 percent, modern authorities such as IEEPA omit a numerical ceiling, which has led some to argue that tariff power is uncapped; however, absence of a percentage limit is not the same as Congressional intent to authorize unlimited tariff escalation. 

As of this writing, no public record appears to document the use of Section 338 in the post-World War II period; it can reasonably be described as effectively dormant. Trade policy moved toward treaty based systems and later toward the procedural requirements of the Trade Act of 1974. That shift did not repeal Section 338. It simply placed it on a shelf. The statute has been gathering dust for decades. Dust, however, is not the same as expiration. Courts do not toss statutes in the trash because they are unfashionable.

Why 338 Matters If IEEPA Shrinks

A limitation on IEEPA would not end presidential influence over tariffs. It would only narrow one path. Section 301 would remain available. Section 232 would remain available. Both have been used aggressively in the past, and commentators today are speaking at length about their potential as a tool for the executive branch.  

Section 338 would sit nearby as a third option that has fewer procedural requirements than Section 301 and fewer definitional controversies than Section 232.

This is where Smoot-Hawley becomes relevant again. The statute created both the punishment schedule in Column 2 and the retaliation authority in Section 338. Congress kept control over the former. The President kept control over the latter. 

If an administration sought steep tariff increases without returning to Congress, Section 338 would stand out as a legacy option — legally available but shaped by trade assumptions that predate the modern rules-based system.

Any modern use of Section 338 would have to contend not only with domestic statutory limits but also with the United States’ WTO commitments, which did not exist when the provision was drafted.

A Practical Path for Future Tariffs

If the Court restricts the scope of IEEPA, the administration is likely to look for existing statutory authority that can be exercised without delay. Section 338 could serve that function. The record of trade measures affecting foreign commercial actors—including U.S. firms—is well documented in WTO disputes, USTR reports, OECD studies, and foreign regulatory actions. In the case of China, reports have identified market-access limitations, industrial subsidies, licensing and investment restrictions, data-localization requirements, and export restraints affecting multiple trading partners.

Section 338 contains no textual prohibition on the use of contemporary evidence to support action under an older statute. The fact that the provision has been rarely invoked does not, by itself, diminish its legal force while it remains on the books.

Dormancy can be an indicator of obsolescence. Trade statutes, like the law prohibiting the eating of frogs that die during a frog jumping contest, sometimes persist not because they serve a contemporary purpose, but because the political cost of repeal outweighs the practical harm of leaving them untouched. Many such provisions persist as historical artifacts of the trade logic that produced them, rather than as tools aligned with contemporary trade frameworks.

Because we all remembered what happened in Calaveras County, right?

Section 338 has the characteristics of a vestigial tool: born of a different trade architecture, shaped by bilateral retaliation norms of the 1930s, and largely overshadowed by the multilateral and rules-based systems that followed.

IEEPA and the Limits of Executive Power: Statute vs Regulation vs Proclamation

When discussing executive authority under the International Emergency Economic Powers Act (IEEPA), it is essential to distinguish three distinct layers of U.S. trade governance: statutory law, regulatory implementation, and presidential execution. Congress creates the legal architecture and this includes the Tariff Act of 1930 and its successors, which determine the structure of tariff treatment, including the existence of Column 1 and Column 2 duty status. 

Agencies implement those laws through regulations, located primarily in Title 19 of the Code of Federal Regulations, which translate statutory requirements into procedure. The President acts, not by rewriting statute or regulation, but through proclamation when Congress has delegated conditional authority, such as the power to suspend preferences, block transactions, or impose temporary duties in response to emergencies. The ability to adjust a tariff rate under IEEPA is not equivalent to authority to reassign a nation from Column 1 to Column 2, because the former is a time-limited discretionary action, while the latter would alter the statutory foundation Congress constructed.

The Ghost in the Machinery

Smoot-Hawley is not returning as a legislative model. No one is proposing a new universal tariff schedule with 1930s rates. The modern discussion does not concern the resurrection of the old law. It concerns the rediscovery of the surviving mechanisms. 

When people talk about Section 338, they are talking about the part of Smoot-Hawley that a president can still use without congressional input. The statute is limited, but it is potent. It reflects a philosophy of retaliation that Congress endorsed nearly a century ago and never withdrew.

The ghost of Smoot-Hawley is not the tariff table that economists warn us about. The ghost is the knowledge that the president still holds a sliver of discretionary tariff authority from that era. If IEEPA becomes less flexible, Section 338 will stand out as a reminder that Congress once delegated retaliation powers that were intentionally broad. The administration may decide that the old tool is still sharp enough for modern use.

How This Impacts You

Companies with exposure to shifting tariff regimes should prepare for a period of policy experimentation. A decision that limits IEEPA will not simplify the landscape. It will redirect presidential attention to the older statutes that still permit aggressive action. Section 338 is one of those tools, and it deserves a careful reading by any importer that relies on stable duty structures. 

If you need guidance on how these authorities may affect your supply chain or product classifications, O’Meara and Associates can help you evaluate the risks and build a plan that keeps your operations steady while Washington debates the reach of executive power. Contact us today and let’s set you up for success.