Trade hit – NZ exporters will face a 10% tariff in the US. Photo / 123rf
Trade hit – NZ exporters will face a 10% tariff in the US. Photo / 123rf
A 10% tariff on exports to the US could cost the economy $900 million, impacting GDP by 0.2%.
Economists warn of significant indirect effects on global growth and potential impacts on commodity prices.
New Zealand’s meat and dairy industries face challenges, with the meat industry particularly exposed due to US market reliance.
The blanket 10% tariff on all exports to the United States would cost the economy about $900 million or about 0.2% of GDP and is “likely to be manageable”, says Westpac chief economist Kelly Eckhold.
The indirect effects from lower global economic growth and a wider trade war would bemore significant but were harder to assess, he said.
Eckhold noted Reserve Bank (RBNZ) analysis suggesting that significant US tariffs, accompanied by retaliation, could lower trading partner growth by as much as 1%.
Weaker global demand was likely to depress commodity prices, Eckhold said.
“It could have been worse … but it’s still bad enough,” said KiwiBank chief economist Jarrod Kerr.
“New Zealand may be getting off relatively lightly, with the blanket 10% tariff. But a heavier hand was dealt to China and other Southeast Asian countries.”
“It has left us contemplating how much all these tariffs will weigh on global growth. And it’s still hard to quantify, but negative nonetheless.”
ASB chief economist Nick Tuffley described the direct tariff as “moderate”, at least in relative terms.
But he also warned about the flow-on from the hit to other major trading partners.
“We will inevitably wear some impact,” he said.
“Activity is likely to be a touch weaker via reduced export earnings, with inflation impacts more ambiguous.”
There could be short-term inflation lifts through imported goods affected by higher production costs and on added kiwi dollar weakness, he said.
“But diversion of exports produced by affected countries from the US market to our own could dampen inflation,” he said.
Most of these more direct inflation impacts would be relatively transitory, so from a monetary policy perspective would fall earlier than the medium-term time horizon of the RBNZ targets, he said.
Kiwibank’s Kerr suggested the risk to New Zealand’s economic recovery could add weight to an easing bias for the RBNZ.
“An escalation of the tariff trade war, should countries retaliate, could stall our expected economic recovery. And such a scenario would require the RBNZ to push the cash rate below 3%,” he said.
Despite describing the direct tariff hit as manageable, Westpac’s Eckhold noted that the impact would not be spread evenly across industries.
Westpac chief economist Kelly Eckhold believes the impact of the US tariffs is likely to be manageable.
“New Zealand’s largest exposure is in the meat industry (especially beef), with exports to the US totalling $2.6 billion in 2024, accounting for 30% of all meat exports,” he said.
New Zealand’s meat industry representatives said they were disappointed by the decision.
“Our global markets are interconnected, and we need to take the time to fully assess the implications of any disruption to trade flows,” said Sirma Karapeeva, chief executive of the Meat Industry Association (MIA).
“The US is a key importer and exporter of beef, therefore, the US announcement is likely to impact the global beef market. For instance, exporting countries may redirect their products to markets where New Zealand also operates,” she said.
But with the US beef herd at historically low levels and record domestic beef consumption, “we are still expecting high demand from the US for beef, despite the tariff measures”.
The US is also a significant destination for New Zealand dairy products – it took $1.26b worth in the year to February, or about 4.9% of total dairy exports.
There were already sizeable tariffs on our dairy exports averaging out at almost 20%, said Kimberly Crewther, executive director for the Dairy Companies Association of NZ.
“There are knock-on effects in terms of economic growth and demand in markets – it’s not good for anyone,” she said.“There is a lot of water to flow under the bridge, but we do have a history of navigating complex trading environments and protectionism.
“We will continue to do that over the coming months.”
Another key exposure is the wine industry, with exports to the US accounting for 35% of total exports.
“Attention would now turn to how impacted countries responded,” Eckhold said.
“Those that choose to retaliate – for example, the European Union – could find themselves in a tit-for-tat fight with the US that leads to even greater tariffs than those announced,“ he said.
“Those that seek to offer concessions may see today’s tariffs reduced over time. This seems likely in those jurisdictions with very high announced tariff rates.”
Liam Dann is business editor-at-large for the New Zealand Herald. He is a senior writer and columnist, and also presents and produces videos and podcasts. He joined the Herald in 2003.
