As the United States continues to assert itself as a critical trading partner, New Zealand’s small and medium-sized enterprises (SMEs) are taking note of the opportunities – and the challenges – of exporting to this dynamic market. MYOB’s latest data highlights a strong reliance on the US/North American market for a substantial segment of Kiwi exporters, even as global uncertainty looms large.
According to MYOB’s March 2024 Business Monitor, 18 percent of New Zealand SMEs export overseas, and nearly one-third (32 percent) of these exporters focus on the US/North America. The data underscores the critical role the US plays in our trade ecosystem, particularly for ambitious SMEs. Mid-market enterprises (defined as businesses with 20-500 employees and annual revenue exceeding $5 million) are also heavily invested in the US, with 19 percent reporting direct export activity or an overseas presence in the region.
Yet, exporting comes with its costs. SMEs that engage in overseas trade report significantly higher increases in overheads, $3,171 on average over the year leading up to March 2024, compared to $1,490 for non-exporting SMEs. For those targeting the US, freight and travel costs are a particularly pressing concern, with 31 percent of exporters to this market highlighting this as a critical pressure point for the year ahead.
The geopolitical landscape
The geopolitical climate, especially as shaped by the outcome of the recent US election, will have profound implications for New Zealand exporters. Kim Clarke, MYOB’s Executive GM for Enterprise & Practice, notes, “The outcome of the US election is likely to have a ripple effect for New Zealand businesses of all sizes… Decisions around international trade – particularly tariffs, for example – will have a significant impact on local operators.”
Indeed, tariffs and trade agreements remain a sensitive area, with past policy shifts – such as changes to the US-China trade relationship – demonstrating how quickly the landscape can evolve. New Zealand businesses, especially those reliant on exporting, must remain vigilant, monitoring both political and economic developments in the US.
The policies and priorities of the returning Donald Trump administration will undoubtably shape global trade, including the US-NZ relationship, in ways that will require Kiwi businesses to stay agile and informed.
During his previous term, Trump’s administration emphasised protectionist policies, including imposing tariffs and renegotiating trade agreements. While specific details of his 2024 trade agenda remain to be unveiled, similar themes are expected to dominate. These include:
- Revised tariff policies: Potential changes to tariffs could affect New Zealand exporters, particularly in key industries like agriculture, technology, and manufacturing.
- Reshaped trade agreements: A renewed focus on bilateral agreements may present opportunities or challenges depending on the industries prioritised by the US.
- “America First” priorities: Greater scrutiny on imports and a push to bolster US domestic industries could make market entry more complex for SMEs.
Kim Clarke.
Inflation, recession, and risk management
Inflation and the threat of an international recession are top concerns for mid-market leaders, with 38 percent ranking both as significant risks over the next five years. Combined with the rising cost of freight and travel, these pressures are prompting Kiwi exporters to reassess their strategies. While the US remains a highly attractive market – 22 percent of mid-market leaders believe it will have the most impact on New Zealand’s trading environment over the next five years – some are considering diversification to mitigate risk.
“Given the prominence of the US market, these ambitious and growing businesses will be watching the US very carefully,” Clarke adds.
“If these additional costs do crystalise, we could see attention and efforts shift toward other markets as they seek new growth.”
Strategies for Export Success
Despite the challenges, opportunities abound for exporters ready to adapt. SMEs should consider the following strategies:
- Monitor global trends: Staying informed about political developments, such as US election outcomes, trade policy changes, and inflation trends, will be essential for anticipating market shifts.
- Invest in resilience: Diversifying export destinations and exploring digital trade solutions can help mitigate risks tied to a single market.
- Optimise costs: Leveraging government trade assistance, such as NZTE programmes, can offset the rising costs of freight and logistics.
- Strengthen partnerships: Building strong relationships with US distributors and understanding regulatory landscapes can enhance market entry and growth.
As the US continues to wield significant influence on global trade, New Zealand SMEs must approach this market with a mix of caution and ambition. With robust planning, adaptability, and a keen eye on economic and political trends, Kiwi exporters can navigate the challenges and leverage the opportunities that the US market presents.
The coming year will be a defining period for exporters as they contend with high costs, shifting global dynamics, and the enduring appeal of one of the world’s largest economies.
“Given the prominence of the US market, ambitious and growing businesses will be watching the US very carefully. If these additional costs crystalise, we could see attention shift toward other markets as businesses seek new growth.”
