WTF: Weird Tariff Frenzy - What It Means For NZ And The World

Saturday, 12 April 2025, 3:15 pm
Article: RNZ

Gyles Beckford, Business Editor

Analysis: New Zealand and many of the world's economies have a ringside seat to what may prove to be the biggest head-to-head trade war between two giants seen in recent history.

The unexpected retreat by the White House on its major policy to level the global trade playing field, by pausing its punitive tariffs against trade partners for 90 days - except China, has wrong-footed many countries.

The White House is spinning the pivot as part of a calculated plan, which has brought serial offenders by the dozen to the bargaining table to negotiate deals, although it may be too early for it to start doing a victory lap.

However, informed opinion has suggested the threat of rising wholesale interest rates and of growing dysfunction in the debt markets - which brought back memories of the Global Financial Crisis and Covid pandemic paralysis - is a more likely explanation for the switchback.

Reality check

The reality is that New Zealand is suffering a 10 percent tariff on exports to the US, meaning the economy faces a nominal $900 million hit to export earnings - about 2 percent of the value of our economy.

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So the challenges facing New Zealand firms selling into the US (such as Fisher and Paykel Healthcare and Skellerup), or with significant interests there (including logistics operator Mainfreight), remain.

Analysts are trying to draw some comfort by saying the announcement and aftermath may not be so bad, into a realm where the less bad news is good news.

Tariffs are widely regarded as likely to dampen US and world growth, give a boost to inflation, possibly even cause recession which is currently a 50-50 chance in the eyes of many.

The opportunities may be that New Zealand picks up market niches created, as other nations pull out or are priced out of the US market, and that this country may be offered goods, which are displaced from either the Chinese or US markets.

But the prospect of New Zealand's two major trade partners, which buy close to a third of our exports, going head-to-head in a trade slugfest is unnerving and worrying.

The risks versus opportunities equation is unsolvable at this stage, but as the African saying goes .. when two elephants fight, the grass gets trampled.

New world trade order

The government has exhibited some quick and nimble political footwork to reassure households and businesses that it's on the case, alert to the risks, and looking for like-minded countries which believe in rules based trade.

Luxon talks to world leaders as Donald Trump pauses tariffs

New Zealand and Australia sensibly are leading a search for free trade supporters, drawing the likes of the European Union to co-operate with, if not necessarily join, the 12 nation Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP).

The drive to get a free trade deal with India may gather further impetus, and getting alongside the sometimes fractious South American common market group Mercosur has long been spoken of.

The world trade rule book, which has been looking dog-eared and frayed for many years, has been ripped apart by the US tariffs, but the World Trade Organisation (WTO) still has some standing and offers a framework covering about two-thirds of world trade that could be used to mitigate some of the turmoil.

Stew Leonard's lamb special

At the most practical level it is small traders facing the financial reality of tariffs, and looking for ways to get around or to minimise their impact on households.

Stew Leonard, a down to earth grocer with a supermarket in Yonkers, New York, sells lamb - New Zealand lamb.

It's on special this week at about NZ$28 a kilo, but perhaps not for much longer.

"With Easter coming up, obviously we have New Zealand lamb right here, which is big right now ... We have American lamb too, and we're making provisions to move all our buying to the US," Leonard told CNN.

Tariffs are likely to mean there are many more Leonards spread through the US.

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