Trump just weaponised a statute older than the Second World War

A blank cheque from 1930

On or around 20 August 2026, the Trump administration reached back to Section 338 of the Tariff Act of 1930 to impose 50% tariffs on $20 billion worth of Canadian imports, covering everything from hockey sticks and tongue depressors to wine, furniture, dairy and cement. The detail that should worry every exporter is not the number. It is that Section 338 has never been used or tested in court. Trade lawyers call it a legal blank canvas.

The provision hails from the same legislative moment as the notorious Smoot-Hawley tariffs. It lets a president levy up to 50% on imports from countries deemed to be discriminating against US business, with no investigation, no time limit and no obligation to calculate actual harm. The stated justification was Canadian discrimination against US dairy, auto and alcohol exports, yet the administration made no attempt to calculate actual damages and swept in unrelated products. Some lawyers argue the statute is obsolete and only ever authorised tariffs that offset documented harm, not blanket levies.

ExportNZ saw it coming. Its July 2026 advocacy update noted the US planned to use Section 338 because Canada had been discriminating against US industry, adding pointedly that the section had never been used in this way to its knowledge.

The escalation nobody stopped

Last-minute talks before the deadline failed. Canadian Prime Minister Mark Carney described them as very intense and delicate, with negotiations reportedly collapsing over terms for light-duty vehicles versus heavy trucks. Canada then announced dollar-for-dollar retaliatory tariffs on US steel, dairy, agricultural equipment, pulp and paper and electronics from September 8, with Carney vowing to match Washington’s new tariffs dollar for dollar.

It got worse. Trump flagged a second round of 50% tariffs on Canadian vehicles, auto parts and steel from January 1 after walking away from what he called a bad deal. Carney held his line, saying the goal had always been the best deal for Canadians, never a deal at any price. The stakes are lopsided: nearly 70 to 72% of Canada’s goods exports go to the US, while Canada remains the US’s second-biggest goods trading partner.

A treaty Trump signed, gutted

Here is the part that turns a bilateral spat into a warning for the rest of us. The USMCA, negotiated by Trump himself and approved by Congress, nominally remains in force. Its duty-free core does not. Lawrence Herman, counsel at Herman & Associates and senior fellow at the C.D. Howe Institute, wrote in August 2026 that the trade war had probably damaged the USMCA beyond repair, its centrepiece of duty-free trade gone. His conclusion was bleak: not much is left of the agreement, and North American free trade is over.

If a congressionally-approved FTA cannot shield a country from 50% tariffs imposed under an untested 1930 statute, the obvious question follows. What protection does any trade agreement actually buy?

New Zealand is already paying

We are not spectators. The US already applies a 15% reciprocal tariff on NZ goods, raised from 10% in August 2025, and it takes 12%, or $9.3 billion, of total NZ goods exports. The bite has been real. In 2025, MFAT data showed NZ wine exports to the US fell 21.9% in the post-tariff quarter, with meat down 2.0% annually. In November 2025, the US reverted tariffs on NZ meat and kiwifruit to MFN rates, a partial reversal that only underlined how arbitrary these calls are.

Exporters have adapted by spreading their risk. In 2025, non-US markets grew 10.8%, and annual goods exports hit $81.0 billion for the year to March 2026, up $7.1 billion. But exports to the US fell $56 million, or 5.9%, in March 2026 year-on-year. The US drag is measurable even as other markets carry the load.

The precedent is the point

Section 338 requires no investigation, no harm calculation, no expiry. If US courts bless its use against a treaty partner, they validate a doctrine under which any president can tariff any country, on any goods, at any time, with no due process. That is the real exposure for New Zealand, and it is exactly what ExportNZ warned about when it framed market access as an entry ticket rather than the prize. Access can no longer be assumed to endure.

The smart response for Kiwi firms is already visible in the diversification numbers. Treat the US market as valuable but volatile, keep building the 87% of demand that sits elsewhere, and watch the Section 338 litigation closely. How American courts rule on a 96-year-old statute will tell exporters more about the next decade of trade than any new FTA signing ceremony.

Sources

• 1News: Trump’s untested new tariffs on Canada raise big legal questions (2026-08-30)
• 1News: US and Canada hold last-minute talks to stop Trump’s 50% tariffs (2026-08-19)
• RNZ: Canada to retaliate for US tariffs, worsening ties after talks fail (2026-08-23)
• RNZ: US-Canada trade war escalates as Mark Carney stands firm against Donald Trump’s threats (2026-08-25)
• C.D. Howe Institute: The Canada-US trade relationship has long operated on good faith. Donald Trump ended that (2026-08-27)
• ExportNZ Trade News & Advocacy Update July 2026 (2026-07)
• MFAT: US tariff 10 percent assessment April 2025 (2025)
• Treasury: Fortnightly Economic Update – 14 August 2025 (2025-08-14)
• Stats NZ: Overseas merchandise trade March 2026 (2026-03)
• MPI: Situation and Outlook for Primary Industries December 2025 (2025-12)