Trump's Tariffs: A "Liberation Day" for New Zealand?

"Tariffs not the way to go." New Zealand Prime Minister Christopher Luxon

PM Christopher Luxon

Liberation Day

Donald Trump's "Liberation Day," marked by the imposition of reciprocal tariffs, feels less like a liberation and more like an economic isolation ward. These tariffs, applied to goods from numerous countries, including a 10% levy on New Zealand exports, have stirred concern and uncertainty within New Zealand's trade sector. While some might breathe a sigh of relief that the initial tariff wasn't higher, the long-term implications for New Zealand's economy, deeply intertwined with global trade, warrant careful consideration.

Attention Narcicist

Trump's actions often appear driven by a need for attention, and slapping tariffs on trading partners is a guaranteed way to grab the world's focus. As a small, open economy, New Zealand relies on selling goods abroad, with the United States being its second-largest export destination, receiving $9 billion worth of goods last year. In contrast, America thrives on domestic sales, possessing a larger and more self-sufficient economic base.

Nuanced Response

While Prime Minister Luxon echoes widespread sentiment that "tariffs are not the way to go," the situation is nuanced. New Zealand, unlike larger economies facing steeper tariffs, might find a silver lining amidst the storm. An economist interviewed on Breakfast TV suggested that New Zealand could benefit from the situation. As the tariffs drive up the price of EU goods, New Zealand could undercut European prices in the US. Simultaneously, as the EU and China impose their own retaliatory tariffs on American goods, New Zealand could potentially gain a competitive advantage in those markets.

Risks

However, this optimistic scenario is tempered by the larger risks to the global economy. As the economist points out, reciprocal tariffs could see US-imposed tariffs increase, and the global economy could suffer, reducing worldwide demand for New Zealand's products. According to one analysis, Canada stands to be hit the hardest because predominantly the cost of the tariff is the consumer. These tariffs will hurt US consumers as they would face a potential reduction on the goods they buy from NZ and other places.

More blows for US consumers

It’s a hard blow to the US consumers. The Breakfast TV Economist continues “So it's a lose on both sides of the trading equation for the US,” indicating the potential for substantial economic losses for the United States. Eventually, US consumers will pay the increased costs of tariffs, reciprocal or not.

Summary

Ultimately, the fate of these tariffs’ rests with President Trump, who may or may not choose to "put that hammer away." In the meantime, New Zealand must navigate these turbulent waters, focusing on diversifying its trade relationships and adapting to a world where economic stability is increasingly uncertain. While the immediate impact of the 10% tariff might be manageable, the broader consequences of a global trade war could significantly impact New Zealand's long-term economic prosperity. It's a precarious balance, requiring strategic foresight and a healthy dose of resilience in the face of an unpredictable global landscape.

Sources; NZ Herald. Interview on Breakfast TV between Jenny-May Clarkson & Economist, early April 2025. The Prosperity Project, Nadine Higgins talks to Mark Riggal.