Richard Allen, President, Global Ingredients.
For New Zealand’s two biggest exporters, dairy goliath Fonterra and kiwifruit marketer Zespri, United States President Donald Trump’s new tariff is like that spider in the corner of your bathroom – something you’re learning to live with but keeping a wary eye on.
For Fonterra, responsible for most of New Zealand’s $1.35 billion of dairy exports to the United States last year, the 10% additional tariff imposed on New Zealand products in April comes on top of existing “very significant” dairy product tariffs, but is a reality of doing business, says Richard Allen, President, Global Ingredients.
The US is one of Fonterra’s top five most important markets and has shown significant growth in recent years, therefore it’s a “critical” destination for the big cooperative’s products, Allen says.
“At the moment, I wouldn’t say it’s having massive impacts. We’re certainly not planning for the 10% to come off any time soon. I think it’s feeling pretty bedded in … we’re confident we can continue to grow [there] and the US market will continue to be a really important market for us – provided all things being equal with where they are today.”
“It’s relatively early days … the tariffs are just one of a long list of things we’ve faced over the last few years, whether it be supply chain disruptions or geopolitical issues.
“We’re still working through it.”
For the horticulture sector’s biggest exporter, Zespri, growth in American consumer demand this season has been a “pleasant surprise”, says chief executive Jason Te Brake, offsetting to a degree the 10% extra tariff and prompting the global marketer to pump more fruit this year into a market it’s been carefully nurturing in recent years.
In response to the higher demand, Zespri will this season deliver 13.5 million trays of New Zealand-grown fruit to the US, compared with a record 11.3m trays in the 2024-2025 season, which earned around $280 million (US sales in 2023-2024 were around $206m.)
Zespri will also this season launch its recently commercialised RubyRed fruit to the US.
The importer of record in the US is getting no hint Trump is eyeing New Zealand for higher tariffs.
“At this stage we don’t expect it. I guess things can change but we’re not getting any indication there might be more to come,” says Te Brake.
“Actually, we have a bit more faith in the US market. We anticipated there might be a slowdown in consumption or we might have more local product to compete against, but we’re not seeing as much of an impact as predicted.
“There’s actually been a bit more of a favourable outcome with demand there.”
Zespri did not expect to pass the tariff cost on to US customers at this stage.
Mount Maunganui-headquartered Zespri recorded global kiwifruit sales of $5.14b in 2024-2025. New Zealand-grown fruit international sales passed $3b. (The grower-owned company also has the Northern Hemisphere to compensate for New Zealand’s off-growing season.
On the general mood in international food markets after the new tariffs, Te Brake believes nerves have settled after countries “booked” the likely impacts.
“It feels like it has stabilised quite substantially in the last two months and actually people are just getting on now. I think they’re saying, ‘Look we don’t know what will happen and we’ll respond or react once it’s happened.’”
The US has surpassed Australia as New Zealand’s second most important export market, nearly doubling value in the past decade.
Last year the US accounted for around 13% of total New Zealand export value, returning $9b from products led by dairy, wine, meat and machinery.
When the 10% tariffs were announced by Trump in early April, it was forecast that if fully passed on to American consumers, they could cost New Zealand exporters $900 million more a year and prompt a drop in demand for Kiwi products.
Meat exports to the US last year were valued at $2.7b. The Meat Industry Association anticipated the new tariffs would increase producers’ costs 17-fold.
Kiwi winemakers sell around $750m of wine to the US each year. Their industry body, NZ Wine Growers, reportedly said the new tariff would cost them $75m.
On July 8, Trump announced new tariffs of up to 40% on a swathe of countries. New Zealand wasn’t on the list.
Fonterra’s Allen says the exporter was already dealing with “very significant” US tariffs on most of the products it exports to America.
“Where we had better access was in some of our more specialised protein products. In those products we were already facing really high hurdles – the 10% tariff effectively is additive to that ... on other products there’s no kind of blanket tariff.
“Some faced a per metric tonne charge and it was relatively immaterial. Some faced a percentage charge. But for the products we did enjoy relatively good access on, effectively what it means is that the importer of record – that could be our customers or Fonterra, depending on the relationship or the way we bring the product into market – that importer of record will pay 10% on the product.”
Allen says it’s still early days on the tariffs.
“It’s a top five market for us and we’ve seen some really significant growth in that market over the last few years and we will continue to see it. It will continue to be a really, really important market for us ... this is just what I would call the reality of doing business and working through it with our customers.”
Dairy is one of the world’s most trade-protected products globally, Allen says.
As to the impact of the US tariffs, there’s a whole range of factors that go into contract negotiations with markets and customers, he says.
“So now for us going into the US, this is an additional cost. Where that cost sits is just one of the many costs that come into the equation of international negotiation and setting up these multilateral long-term agreements.
“Remember, for a lot of our large contracts with our large partners, these are multi-year agreements and they’re multi-faceted in terms of the inputs and the dynamics that go into them.”
As to knock-on effects of the US tariffs in Fonterra’s other markets, Allen says they’re not yet significant.
The escalation of tariffs between the US and China had the potential to impact the US dairy industry in its lower-grade lactose and whey product sales. A by-product of the US’ major cheese industry, these products went into animal feed in China.
But they’re not products Fonterra makes in any quantity.
“In that example, most likely the Europeans or the South Americans or someone would have stepped in.
“Dairy has a pretty unique way of rebalancing itself. It’s a bit of a balloon. If you poke it somewhere it tends to poke out somewhere else.”
But Fonterra is “watching carefully” the US-Europe relationship and potential for tariffs, Allen says.
“The EU is a major exporting bloc and they do export a pretty significant amount of product into the US. Again, it’s anyone’s guess as to what actually happens, but that potentially would have more knock-on effects into the globally traded dairy market.”
Trump has since threatened a 30% tariff on EU imports. A Fonterra spokesman said it would be speculative to talk about any potential impact on the globally traded dairy market.
For Fonterra, the “explosion” in US consumer demand for protein and protein-fortified beverages in the past five to seven years presents a “super-important opportunity”, he says.
“Protein consumption has gone from the kind of product weightlifters and hardcore fitness people consumed to being now very much an everyday consumption habit for everyday Americans. Everyday foods are becoming protein-fortified.”
Fonterra has for years been investing in creating protein that can go into other foods and is good to eat, he says.
“That’s where we hold intellectual property. We hold some really important trade secrets and that’s where we think our proteins are a huge opportunity. We’ve seen double-digit growth in that market in the past few years and we will continue to see protein consumption grow in the US.
“It’s being spurred on now with the rise of GLP-1 and weight loss drugs.”
GLP-1 receptor agonists mimic the effect of the natural GLP-1 hormone, helping to regulate blood sugar and promote weight loss.
“So the US continues to be a top five market for us.”
Fonterra-supplied figures sourced from S&P Global show New Zealand dairy exports to the US between and including 2020 and 2024 totalled $5.5b.
In 2020 exports were worth $887.5m. In 2024 they rose to $1.35b.
With more than 75% of New Zealand’s milk market, Fonterra was responsible for the majority of the exports.