US trade tariffs: Fiji facing severe challenges, NZ takes cautious approach

Fiji is facing the highest tariffs from the United States in the Pacific region, raising alarm and confusion among local government officials and economists as the trade landscape shifts under US President Donald Trump’s new import policies.

New Zealand has adopted a more cautious approach as concerns grow over the potential fallout for Pacific Island nations like Nauru and Vanuatu, which are heavily reliant on exports.

Trump says his new tariffs are “reciprocal”, claiming that Fiji imposes a 63 per cent tariff on the US and New Zealand a 20 per cent tariff.

But Fiji’s Deputy Prime Minister Biman Prasad says Fiji does not levy such high tariffs on any goods or countries.

Fiji’s main exports include mineral water, kava, sugar, processed fish, taro, ginger, and turmeric, which may soon face a steep export tax of 32 per cent.

Satish Ranchhod, senior economist at Westpac, says many Pacific nations lack the leverage to negotiate effectively.

“When you're a small economy, there's not too much you can do other than pointing out that you probably should have some more accommodating trade positions,” Ranchhod told William Terite on Pacific Mornings.

US Commerce Secretary Howard Lutnick told CBS that the new tariffs should encourage Americans to buy locally sourced products such as Poland Spring Water instead of Fiji Water.

“You’re going to actually think about the Americans who make the products, the Americans who produce these products and work in these factories, it’s time for us to take care of them, instead of taking care of the world," Lutnick says.

The US tariffs may have a drastic impact on Fiji's major exports. Photo/Fiji Village

Fiji Water comes from an aquifer in Viti Levu but is owned by the American conglomerate The Wonder Company, based in California. Poland Spring Water is sourced from the state of Maine in the United States.

A Fiji Water spokesperson told Fiji Village that the company is evaluating the potential impact of the tariffs and exploring options following Thursday’s announcement in Washington.

In other Pacific nations, Tokelau, a non-self-governing territory of New Zealand, received a baseline tariff of 10 per cent, while Norfolk Island, an Australian territory, was given a 29 per cent tariff.

Nauru, one of the smallest nations in the world, faces a 30 per cent tariff, and Vanuatu has been assigned a 22 per cent tariff.

NZ’s impact and reaction

Ranchhod says although New Zealand received the lowest tariff rate of 10 per cent, it will cause a “pretty sizable knock” to its economy.

“We're a relatively small market for the US, we're 0.2 per cent of their trading basket. There's not a huge amount for us to battle with and a lot for us to lose.

“The total cost of these taxes, if it went to the maximum extent, would be about $900 million.”

Watch Prime Minister Christopher Luxon explain why New Zealand will not impose reciprocal tariffs.

Ranchhod says the tariffs could lead to higher costs for US consumers and lower demand for New Zealand exports.

“Even if we're not directly targeted with serious or very large tariffs, a slowdown in global activity could pass through to us through reduced demand in many economies,” he says.

“This reinforces the importance for us of having a diversified trade basket. The issue here is that it's not simply that the US is imposing tariffs, but that those tariffs could have quite a serious impact on those other markets that we trade heavily with, particularly those in Asia.”

New Zealand Prime Minister Christopher Luxon says the country will not retaliate, telling media that the Government is exploring new export opportunities outside the United States.

“If we were to hike tariffs ourselves, that would lead to prices increasing here.”

Westpac Senior Economist Satish Ranchhod. Photo/Infrastructure News

Cautious approach

Ranchhod urges businesses to make careful financial decisions.

“Keep an eye on those cash flows, have a look at what measures can be put in place, things like appropriate management of financial products, like your foreign exchange, that can be a big buffer for a lot of businesses who are exposed to these rocky global waters.”

He says predicted cuts to the Official Cash Rate next week may only offer short-term relief amid global uncertainty.

“We are potentially looking at a downside risk for growth, but we could see some lift in inflation.

“I think those concerns about the strength of activity will trump the inflation concerns in the near term, and I think it will reinforce the RBNZ’s indications that they will continue to cut the cash rate.”