Executive summary

This edition of Trade Talking Points provides updates on trade policy developments, including the United States (US) temporarily suspending Section 338 duties on certain Canadian imports, the Trump Administration publishing a report accusing countries of illegal transshipping, the US imposing tariffs on drones and drone components, and the European Union (EU) Packaging and Packaging Waste Regulation becoming applicable.

Latest US trade policy announcements

US temporarily suspends Section 338 duties on certain Canadian imports

On 18 August 2026, President Trump signed a Proclamation temporarily suspending the additional duties imposed under Section 338 of the Tariff Act of 1930 on imports of Canadian alcoholic beverages, dairy products and motor vehicles.

The Section 338 tariffs imposed on Canada had been announced on 20 July 2026, in response to Canada's alleged discriminatory trade measures on American products and were due to take effect on 19 August 2026.

However, following discussions between the US and Canada, Canada has expressed a commitment to remove the trade measures in question. In response to this bilateral dialogue, the Section 338 tariffs on Canadian goods have been suspended for three days.

Upon the expiry of the temporary suspension, the Section 338 tariffs will apply to goods entered for consumption or withdrawn from a warehouse for consumption, on or after 12:01 a.m. Eastern Time on 22 August 2026.

Trump Administration publishes report accusing countries of illegal transshipping

On 13 August 2026, the Trump Administration published a report identifying more than 40 countries as presenting an elevated risk of illegal transshipment of Chinese-origin goods destined for the US through third countries that are subject to a lower import duty rate than China. These countries include Canada, Japan and Mexico.

Transshipment refers to the movement of goods through an intermediate jurisdiction before they reach their destination. The report alleges that some Chinese-origin goods are being routed through third countries and declared as originating in those countries, despite not undergoing substantial transformation. As a result, the goods may benefit from lower US duty rates than would apply if their Chinese origin were declared.

In response to the alleged illegal transshipments, the report outlines a proposed AI-enabled customs enforcement system, referred to as the "Detective Border," designed to support US Customs and Border Protection (CBP) in identifying illegally transshipped imports.

US imposes tariffs on imports of drones and drone components

On 13 August 2026, President Trump signed a Proclamation imposing new tariff measures under Section 232 of the Trade Expansion Act of 1962 on imports of drones and drone components. The Proclamation imposes the following measures:

• Imports of drones with a maximum take-off weight of more than 25 kilograms, drones with thermal imaging capabilities, drone docking stations and certain drone components will be subject to a 100% tariff.
• Imports of drones with a maximum take-off weight of 25 kilograms or less will be subject to a 25% tariff.
• Drones and drone components of the EU, Japan, the Republic of Korea, Taiwan, Switzerland or Liechtenstein will be subject to a duty rate no higher than 15%.
• Drones and drone components of the United Kingdom (UK) will be subject to a duty rate no higher than 10%, provided that the hardware, software and technology substantially originate from within these countries and the US.

Further, the Proclamation grants the US Secretary of Commerce authority to establish an onshoring program for companies investing in manufacturing drones and drone components.

The measures imposed by the Proclamation will apply to goods entered for consumption, or withdrawn from a warehouse for consumption, on or after 12:01 a.m. Eastern Time on 3 September 2026.

For imports of less-sensitive drone components, a 25% tariff rate will apply to goods entered for consumption, or withdrawn from a warehouse for consumption, on or after 12:01 a.m. Eastern Time on 9 February 2027.

See EY Global Tax Alert, US President issues Section 232 proclamation imposing tariffs of up to 100% on unmanned aircraft systems and their component, dated 14 August 2026.

US imposes tariff measures on imports of polysilicon and polysilicon derivatives

On 6 August 2026, President Trump signed a Proclamation imposing new tariff measures under Section 232 of the Trade Expansion Act of 1962 on imports of polysilicon and polysilicon derivatives.

The Proclamation imposes the following Minimum Import Prices (MIP) on imports of polysilicon and polysilicon derivatives:

• US$21 per kilogram of polysilicon
• US$100 per kilogram of polysilicon ingots and wafers
• US$0.22 per watt for solar cells
• US$0.38 per watt for solar modules

In addition to the MIP, imports of polysilicon and polysilicon derivatives will be subject to the following tariffs:

• Imports of polysilicon and polysilicon derivatives will be subject to an additional 15% tariff.
• Polysilicon and polysilicon derivatives of the EU, Japan, the Republic of Korea, Taiwan, Switzerland or Liechtenstein will be subject to an additional tariff, such that the sum of the additional Section 232 tariff and the applicable rate of duty will be equal to a 15% tariff.
• Polysilicon and polysilicon derivatives of the UK will be subject to an import duty rate of 10%.

The measures imposed by the Proclamation will apply to goods entered for consumption, or withdrawn from a warehouse for consumption, on or after 12:01 a.m. Eastern Time on 4 December 2026.

See EY Global Tax Alert, US Section 232 proclamation establishes minimum import prices and a 15% tariff on polysilicon and derivative products, dated 7 August 2026.

Latest EU trade policy announcements

EU Packaging and Packaging Waste Regulation enters into application

On 12 August 2026, the EU Packaging and Packaging Waste Regulation (PPWR) entered into application.

The PPWR entered into force on 11 February 2025, and aims to significantly reduce the environmental impact and volume of packaging across the EU.

The PPWR introduced a range of requirements relating to packaging design, recyclability, labelling and waste management. It also strengthens extended producer responsibility obligations, under which producers must:

• Cover the necessary costs of collection, sorting and recycling
• Encourage eco-design and recyclability through modulated fees
• Ensure financial transparency and accountability

Latest UK trade policy announcements

UK Government launches Critical Mineral Programme funding

On 5 August 2026, the UK Government announced £50m of funding to support critical mineral projects in the UK, with £45m of this available as grant funding through 2030.

The funding will support the UK's Critical Minerals Programme, which aims to strengthen supply-chain resilience for industrial strategy growth-driving sectors, enhance domestic critical mineral production and create employment opportunities and attract investment.

The Government funding has been allocated as follows:

• £20m has been made available to the Magnet Hub, which aims to develop new and innovative manufacturing capability for rare earth permanent magnets in the UK.
• £25m has been made available to the Critical Minerals Accelerator, which aims to scale up new projects and processes, and support the commercialization of the UK's critical minerals capabilities.