Here's what Kiwi consumers and exporters need to know
Recently, US President Donald Trump has implemented significant tariffs on imports from China, Canada, and Mexico, intensifying global trade tensions.
These tariffs, which include a 10% duty on all imports from China and 25% on those from Mexico and Canada, with certain energy imports like oil and natural gas from Canada taxed at 10%, have prompted retaliatory measures from these nations.
This escalating trade conflict, though centred thousands of kilometers away, could have ripple effects reaching New Zealand, Stuff reported.
Potential direct impacts on New Zealand
The question on many Kiwis’ minds is how these international trade disputes might affect New Zealand directly.
Stephen Toplis (pictured above left), BNZ’s head of research, noted the uncertainty surrounding the situation.
“There are still too many unknowns,” Toplis said. “At the moment, it’s just the US lobbing grenades at Canada and Mexico and, to a lesser extent, China, and they’re lobbing them back.”
New Zealand’s export vulnerability
As an export-driven economy, New Zealand could face significant challenges if these trade barriers were extended to include Kiwi products, Stuff reported.
A hypothetical imposition of tariffs on New Zealand exports to the US would force local businesses to either reduce prices or seek alternative markets, which, according to Toplis, could be feasible in the short term.
“If we can’t get our key commodities‒ beef, wine, and dairy ‒ into one country, we turn to another one. But the wider the tariffs reach, the tougher that becomes,” Toplis said.
Broader economic consequences
Beyond direct trade impacts, a full-scale trade war could dampen global economic growth, with significant repercussions for countries involved, Stuff reported.
Gareth Kiernan (pictured above centre), Infometrics’ chief forecaster, predicts such a scenario would lead to slower economic growth and higher inflation in affected countries.
This could indirectly impact New Zealand through reduced global demand for its exports and potential disruptions in financial markets.
Implications for Kiwi households and mortgage rates
Kelly Eckhold (pictured above right), Westpac’s chief economist, suggested that the tariff situation could also influence New Zealand's financial landscape, particularly in terms of interest rates and inflation.
“That is likely to flow over to New Zealand interest rates, although the inflation consequences are less clear as there could be a combination of increased global supply of manufactured goods that otherwise would have gone to the US versus a weaker exchange rate,” Eckhold said.
Navigating trade war risks: Strategies for New Zealand
The unfolding trade war presents a complex challenge for New Zealand, with significant uncertainties and potential economic risks.
“It’s unequivocally bad news,” and businesses and individuals should prepare for various scenarios,” Toplis said. “Planning for worst-case scenarios and minimising risk exposure can help mitigate the potential adverse effects of a prolonged trade conflict.
