Anand Reddy: Clinton win best result for NZ exporters

Written by Anand Reddy, a PwC partner

They say when the United States sneezes, the world gets a cold. With Hillary Clinton and Donald Trump fighting for the White House, tomorrow's US election is perhaps the most talked-about, the most controversial and the most important election in the country's 240-year history.

But what will it mean for New Zealand and our thousands of businesses? In our small economy, the goal for many New Zealand companies is to start exporting overseas as quickly as possible.

In fact, PwC's New Zealand CEO Survey shows that the US is ranked as the third most important global market for today's Kiwi companies, with almost half of our CEOs putting it at the top of their agenda in terms of growth prospects (only marginally behind first-place Australia and China). If the US is about to sneeze, should we be readying our tissues?

That depends on who wins. In reality, each candidate has very different views on policies that would help or hinder successful free trade between the US and New Zealand.

In typical US fashion, it's time for an (economic) faceoff:

Tariffs

Trump has been particularly vocal on the topic of free trade. He has proposed a 45 per cent tariff on Chinese imports and a 35 per cent tariff on imports from Mexico, two of the US' biggest trading partners.

While the former Apprentice star has not given a stance on trade with New Zealand during his three big election debates, he has shown an intention to keep more manufacturing and commerce coming from inside the country.

Hillary Clinton has also failed to mention New Zealand exports in particular, although she does come with a history of promoting foreign trade through reduced tariffs.

She voted yes on developing trade among the US and Singapore, Chile and Vietnam, and has only threatened to impose targeted tariffs around countries that break the rules.

NZ Verdict: Clinton wins

Trump's insular America doesn't bode well for NZ businesses hoping to increase exports to the US. Clinton has a history of fostering NZ and US relations, having signed the Wellington Declaration in 2010. She is more than just a known quantity, and her past portrays a person who encourages overseas trade.

Trans-Pacific Partnership Agreement

The Trans-Pacific Partnership Agreement (TPP) has been a point of contention between the candidates, even though they appear to agree that it isn't an ideal policy. As it stands, the agreement is designed to encourage trade among New Zealand and 11 other countries, including the United States, although it may not get off the ground with either candidate.

Trump has called TPPA "horrible", "terrible", and "disastrous", so we can expect it to fail completely under his presidency. Clinton , meanwhile, once called the agreement the "gold standard", and praised it in the media.

In more recent times, she has showed unease with the TPPA, and suggests that it needs to be rewritten or scrapped altogether.

NZ Verdict: Dead heat

Clinton could be considered the more likely to successfully implement a large-scale agreement like TPPA, or whatever name a new free-trade policy might come under, though we can only assume neither are in favour of it today.

Donald Trump points to the media as he addresses the crowd during a campaign stop. Photo / AP
Donald Trump points to the media as he addresses the crowd during a campaign stop. Photo / AP

Exchange rates

Volatility in exchange rates could destabilise the interest rate environment. By exporting to a different country, New Zealand firms might view this volatility as a risk to financial planning and profit margins.

Donald Trump has already had an effect on the US dollar and the US stockmarket, with the currency fluctuating along with his growing popularity.

As my colleague Roger Kerr noted: "[In] a surprise Trump victory the US dollar would initially weaken further to $1.1300 against the euro".

A Trump success would likely cause low confidence in the USD, particularly due to his obscure policies, which would disrupt New Zealand firms that export to the US.

In contrast, Hillary Clinton is more of a known quantity, and the short-term effects of her victory are unlikely to destabilise the US dollar to the same extent as Trump, if at all.

Taking into account the next offical cash rate movement by the RBNZ, Roger predicts that a Clinton victory would strengthen the US dollar.

NZ Verdict: Clinton wins

With more confidence, US stock and currency markets could begin to rebound from a difficult election period, helping to keep exchange rates manageable for the time being.

The US market

Another big factor in successful trade with the US is the local market. If businesses are largely in recession and confidence is contracting, a period of reduced consumer spending could affect the sales of Kiwi exports.

Many of New Zealand's products are known for their higher quality. Think manuka honey, wine and meat, so a society that is less likely to spend could affect our exporters more.

As president, Trump might not bring about social prosperity and increased discretionary spending. One of his main election points, the building of a concrete border wall between the US and Mexico, would put the country an extra US$25 billion in debt.

Meanwhile, his tax plan alone is thought to have the effect of adding US$5.3 trillion to the national debt. The impact on low-income communities is left to be seen, though predictions don't favour higher levels of consumption.

US analysts say Hillary Clinton's plan would add US$200b to the national debt, but increase tax revenue by almost the same amount ($191b).

NZ Verdict: Clinton wins

The US economy has a difficult period ahead of it, although Clinton looks likely to bring a period of "business as usual" compared to Trump's socially-disruptive policies.

A Clinton victory would almost certainly prove to bring more favourable trading conditions for NZ companies on US shores.

Final verdict

As the US heads out to the polling stations tomorrow, NZ businesses will be waiting to see who gets into office. On almost all aspects, Hillary Clinton appears to be a better president for the continued success of New Zealand trade in the US; an essential part of business for many Kiwi companies.

With America ready to sneeze, we'll soon see whether New Zealand's businesses will need a tissue or something much stronger.

- NZ Herald

Anand Reddy is a PwC partner

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