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With the stormy arrival of the Trump Administration, a degree of uncertainty has entered the US market. For New Zealand exporters staying on course requires cool heads and a weather eye.

By Tracey Epps.

Speculation has been rife in recent months about the implications of a Trump Presidency for New Zealand exporters.  
As the New Zealand Institute of Economic Research (NZIER) has pointed out, any economic slow-down in the US will deliver us a “double-whammy” – first to our $8.4 billion export trade with the US, particularly the meat, dairy, wine, wood and tourism sectors, then by dealing us a second round impact through weakened global demand. 
However, opinion is not unanimous on the effect that Trump’s policies will have on the US economy.  
New Zealand’s Special Agricultural Trade Envoy, Mike Peterson, has suggested that President Trump’s promised infrastructure spend may stimulate US GDP to the potential benefit of New Zealand exporters  while others point to the prospect of higher inflation and a higher greenback, which would make our exports more price competitive. 
Of more general concern is that the Trump Administration will reverse many of the trade liberalisation gains of the past few decades.  Catherine Beard of Export NZ identifies two key risks: “one is not positive change, as would have been delivered by TPP and the second is that more barriers go up”.   
So what are New Zealand exporters to make of all this?  
Certainly, Trump’s rejection of the Trans-Pacific Partnership (TPP) Agreement was disappointing.  Among other effects, the beef industry will face stiffer competition in Japan from Australia as their producers continue to benefit from a 20% tariff under their bilateral deal with Japan while – absent the TPP – New Zealand exporters will continue to face a 38.5% tariff.  
But what about President Trump’s other trade moves?  The potential list is quite long, but key aspects include:

  • Renegotiation of NAFTA and an import tax into the US on Mexican exports:  this may affect New Zealand exporters with operations in Mexico, such as Fisher & Paykel.  Details of the President’s intentions remain elusive at this stage.
  • A border tax adjustment:  Republican proposals to tax spending on imports instead of taxing sales of exports may or may not be consistent with trade rules.  The devil would be in the detail.  Media predictions of retaliations against the US are premature.
  • A greater focus on bilateral deals:  this is one of President Trump’s more troubling suggestions.  A small country like New Zealand is undoubtedly better off negotiating in a group where we are part of a wider process of give and take.  A bilateral negotiation with a powerful partner such as the US is always going to be difficult, while the prospect of the US reaching deals with other partners risks our exporters losing ground to their competitors.
  • Greater enforcement of World Trade Organisation (WTO) rules:  in theory this would be positive for a small export-dependent country like New Zealand, but much depends on the implementation.  Overly aggressive enforcement could risk antagonising other WTO members in a manner detrimental to the global system.

“There is no reason to think our exports to the US are at risk and it remains a market with huge potential for New Zealand.”  

It would be a fool’s errand to predict where this will all end.  But New Zealand exporters should not panic.  There is no reason to think our exports to the US are at risk and it remains a market with huge potential for New Zealand.  
Exporters should keep a close eye on developments and pay careful consideration to the structure of their global supply chains if, for example, the US imposes tariffs on goods from countries such as China, or re-imposes sanctions on exports to Iran.
Recent statements from the New Zealand Government suggest that it will pursue all avenues for better market access and open trade rules, including by continued engagement with its other TPP partners.  This is surely positive – as we learned when the UK joined the European Community in 1973, the more broadly we spread our net, the more easily our exporters can adapt to unexpected developments in any given market.

Reference sources:
  John Ballingal, “Trumponomics – what would a Trump presidency mean for the NZ economy, 3 Nov 2016.
  Stuff NZ, “Trump presidency could do NZ good, trade envoy says”, 2 February 2017.
  NZ Herald, “What does the Trump factor mean for Kiwis?” 22 January 2017. 
  NZ Herald, “What does the Trump factor mean for Kiwis?” 22 January 2017.
  

Glenn Baker

Professional writer/editor with 35-plus years experience - including radio copywriting, various television writing/production roles, and writing for business magazines. I have also co-owned a wholesale food distribution business.

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