Editorial: Brace yourself for US Presidential election madness

Former US President and 2024 Republican presidential candidate Donald Trump speaks at a campaign rally at the Rocky Mount Event Center in Rocky Mount, North Carolina, on October 30, 2024. Photo / AFP

Editorial

For the next few days, many Kiwis will be immersed in wall-to-wall coverage of the US presidential campaign. On Wednesday afternoon, we’ll follow the electoral college maps and watch as counties report from crucial swing states.

Then we’ll brace for the chaos and turmoil of the aftermath.

Whoever wins, and right now it is too close to call, it will be a compelling drama. But it begs the question, why do we care so much? What’s at stake for New Zealand?

Many Kiwis are cheering on Kamala Harris or Donald Trump because of the different social and moral values they represent.

They quite rightly see that America has an outsized influence on the world. This is an election that defines what America stands for and will inevitably shape our outlook – whether that is for or against the status quo of the US establishment.

What the results will mean for New Zealand’s economic situation is another thing altogether.

Former Prime Minister Sir John Key has endorsed Donald Trump declaring him the best for the economy. But which economy he’s best for isn’t so clear.

Trump’s staunch nationalistic approach to trade looks set to throw a spanner in the works of the tepid global economic recovery. And it is hard to square his plans for comprehensive tariffs across all imports with any upside for New Zealand.

Trump has proposed a universal tariff of 10% on all goods imported into the US and tariffs on China of 60%. He can side-step the need for Congressional approval by declaring a national emergency, which allows him to do it with a Presidential decree.

It’s fair to say that Key’s enthusiasm for Trump delivering an economic boost isn’t widely shared by economists.

Reuters this week reported that the prospect of Trump’s reelection was a cause of consternation among finance leaders at the recent New York Summits for the International Monetary Fund and World Bank.

Economists at Capital Economics have warned that Trump’s proposed curbs on immigration and new tariffs would be “stagflationary”.

That’s economist jargon for causing inflation and slowing growth at the same time.

There may be some short-term upside for stock markets as a Trump win probably means less regulation and possibly lower corporate taxes.

However, the Capital Economics team warn that his ability to cut tax will be limited by Congress and by pressure from bond markets.

Locally, Chris Nixon, a principal economist at the NZIER, warns that New Zealand may be facing a lose/lose scenario on trade. He notes that none of Trump’s previous tariffs have been reversed by the Biden administration. He warns that even if Harris wins there is a risk that the Democrats are “seduced by their allure”.

The direct impact of the tariffs on New Zealand goods is hard to pick. If they are universal then our competitors will all feel the pain too.

We may also see a surplus of cheap Chinese goods flooding our market in the face of US barriers.

But the prospect of a renewed trade war is ominous and threatens to curb global growth. That is a concern for New Zealand’s recovery.