‘Wait and see’: New Zealand exporters brace for impact of Trump’s trade war

New Zealand exporters are reacting cautiously as President Donald Trump’s new tariffs on Mexico, Canada, and China prompt uncertainty in global trade dynamics.

Under the executive orders, Canada and Mexico will face a 25 per cent tariff, while Trump announced an additional 10 per cent tariff on Chinese imports on top of existing duties.

Canadian energy imports, such as oil and natural gas, will incur a 10 per cent tariff, reflecting the Trump administration’s intention to address issues surrounding immigration and drug trafficking.

Speaking to Levi Matautia-Morgan on Pacific Mornings, Joshua Tan, Executive Director of Export New Zealand, says there are “some positives as well as negatives” for Aotearoa and Pacific exporters.

He said the tariffs could present an opportunity for New Zealand exporters to fill the gaps left by Canadian, Mexican, and Chinese goods in the US market and replace US products in those countries.

“We've got free trade agreements with all three of those countries, Canada and Mexico, through the Comprehensive and Progressive Trans-Pacific Partnership (CPTPP), and also our longstanding free trade agreement with China as well,” Tan said.

But Tan cautioned that New Zealand exporters might also face increased competition in global export markets.

“These tariffs will displace goods and exports from all of the countries involved, and they'll also need to find new markets to sell to.”

Joshua Tan, Executive Director of Export New Zealand, says the situation presents both opportunities and challenges for New Zealand exporters. Photo/Export NZ

Breaking down tariffs

Tan said that tariffs act as a country's tax on imported goods from another.

“Some countries will impose tariffs as a way of protecting local industries and manufacturers.”

He said this made foreign products more expensive and less competitive for domestic consumers, leading to higher prices.

“The US imports about US$46 billion worth of agricultural produce - food - and $87 billion worth of motor vehicles from Mexico. Thirty per cent of their timber for home building in the US comes from Canada.

“These tariffs will have a pretty negative effect on the amount of those types of goods coming into the United States.”

Trump recently said that although the tariffs would cause “some pain” the outcome would be worth it.

Australia responds

Following the US tariffs announcement, Australia’s Trade Minister Don Farrell said he wanted to discuss the issue with the US “as soon as humanly possible”.

According to the Australian Department of Foreign Affairs and Trade (DFAT), in 2023, Australia's goods and services exports to America were valued at A$33.6 billion, while imports from the United States totalled A$65.1 billion.

This results in a trade deficit of A$31.5b for Australia.

Farrell said the United States has a trade surplus with Australia while running a deficit with Canada, Mexico, and China.

Australia’s Trade Minister Don Farrell. Photo/trademinister.gov.au

‘Wait and see’

Tan said New Zealand companies are currently in a “wait and see” situation regarding the Trump administration’s plans for us.

“However, having a look at some of the rhetoric out there, it seems like they are targeting countries where there is a significant trade deficit for the United States,” he said.

“So that's saying that the US imports more goods and services than they export to a certain country. New Zealand does have a trade surplus with the US - we export more to the US than we import from them.”

For the year ending March 2024, the Ministry of Foreign Affairs and Trade (MFAT) reported that NZ exported NZ$14.6b in goods and services to America and imported $11.4b, resulting in a trade surplus of NZ$3.5b.

“That seems to us like a pretty significant figure, but in the context of things compared to some other countries, we are a pretty small fish,” Tan said.

New Zealand has yet to see the impact of Trump's tariffs. Photo/File

He said the US trade deficit has recently widened, with the US Bureau of Economic Analysis confirming an increase from US$73.6b in October to $78.2b in November last year.

“For our exporters, again, I think it's a bit too early to tell. “As we said, it's a wait-and-see to see what the impact is for New Zealand exporters, and again, there could be some opportunities here for exporters to leverage.

“We do know that exporters are keeping a real close eye on what's happening, what's been announced [and] at the end of the day, international trade is a really dynamic environment at the best of times.

“We're confident that our exporters can adjust to all of the global changes at the moment.”

The Canadian, Mexican, and Chinese governments have said they plan to retaliate to Trump's tariffs.

Watch Canada's Prime Minister Justin Trudeau's response to Donald Trump's tariffs.