US President Donald Trump’s announcement of sweeping tariffs is not good news for New Zealand, but there is still a lot of detail to work through, commentators say.
Trump announced on Thursday he would instigate reciprocal tariffs on countries imposing duties on other countries – including responding to what he said was a 20% tariff on US goods from New Zealand.
The baseline is 10%, which will apply to New Zealand, while China would have a rate of 34% and the European Union and Japan would face 20% and 24%, respectively.
Kelly Eckhold, chief economist at Westpac, said it could mean a lower return for exporters, but that had to be put in the context of a significant increase in exporters’ returns in the past year.
“If you think about the terms of trade having risen about 18 percent overall, it roughly might knock 2 percent or 3 percent off. That could be a bit more if the global economy really slows down.”
For the average “urban consumer”, he said, people might look at what the exchange rate would do.
“It should probably depreciate a bit. That’s going to make all your imports a bit more expensive. And the general slowing in global growth is going to be a drag for economies everywhere, including New Zealand.”
But he said there was a lot of “water to go under the bridge”.
“Some of the individual tariff rates that have been levied on other countries, particularly in Southeast Asia, are quite large and they’re clearly open for negotiation.
“Because what Trump is saying here is that we’re charging you this, these large amounts, because you’re charging us quite high tariffs. For example, on his table, he has Vietnam – there he says that US exports to Vietnam are subject to a 90 percent tariff. So he’s saying, well, we’re charging you 46. Presumably his objective is to get around the table and get that 90 turned into something lower.”
But Eckhold said a lot of Trump’s numbers looked “questionable”.
“I mean, we were looking at the number for example for New Zealand and don’t really quite understand why it should be 20 percent. It could be a combination of the fact that we have a 15 percent GST plus some bilateral tariffs. It could be, but then that doesn’t really explain some of the numbers for other countries, so the provenance of that, the numbers on that table is uncertain.
“The other thing we don’t know, of course, is the extent of retaliation that will occur here, which will obviously amp up the impacts. Last night, the Europeans were talking quite tough here.”
Trump’s announcement was not good news for New Zealand, he said, but there were some buffers in place that would help, including the floating exchange rate.
“I think the saving grace here is that at least New Zealand’s number is the low number in the table as opposed to one of the higher ones.”
It was a bit of a surprise that it was there at all, he said.
“I had thought that they might focus just on those kind of like top 15 or 20 countries.”
Economist Shamubeel Eaqub said there could also be some secondary effects on New Zealand.
“A lot of the high tariffs are on countries we export to. Thinking about China, Vietnam, many of those emerging Asian markets, they’ve been hit pretty hard with tariffs by the Trump administration in the announcements.
“Because they’ve been such a big part of the growth of our exports over the last decade and because their economies are so dependent on exports, if their exports are affected their demand for our commodities might be affected. The only good thing about this is it’s such a big tariff on so many people it’s not like there’s anywhere to hide.”
But he said higher prices for US consumers would decrease demand, and New Zealanders would also feel it in their KiwiSaver accounts.
Dean Anderson, founder of Kernel Wealth, said there would be an impact on New Zealand’s markets, exporters and the wider economy.
“If you look at the wine industry actually at the moment, even before the tariffs, it’s been under a lot of pressure … I think there’ll be some that are hit harder than others.”
The markets were digesting the news, and there would be short term “emotive” reaction. The S&P500 had its worst start to the year since 2022.
“I think it’s going to take a while, though, before we see what the real economic impacts are though. So the markets are going to be noisy and particularly over the first few days now as they try and digest this.”
Anderson believed it could take six to 18 months before the full impacts were seen but said there were positives in the announcement.
There had been concerns that the tariff level could be higher and 10% could give people comfort.
“Now we know what we’re playing with because the challenge has been to date for businesses, for markets, for countries, the pure uncertainty. So now we hopefully have a baseline. We have a a playing field that everybody understands.”
If markets dropped a couple of percent, he said, they would still only be back to where they were in August last year.
“I think it’s manageable for the world… it’s potentially a lot better than what sort of some pundits predicting and I would ignore all the economic forecasts because as we know, they’re never right.
“So predictions of recessions and where the market is going to be at the end of the year? Just ignore them.”
