Donald Trump’s "Liberation Day" tariffs on US-bound imports are expected to have a manageable impact on Rakon’s operations. Photo / Dean Purcell
NZ tech companies with exposure to the US say they’re still weighing the impact of the “Liberation Day” tariffs – but some investors are already voting with their feet, with most tech stocks under pressure in Monday trading.
Wellington-headquartered, ASX-listed Xero is an interesting case.
Morningstar tech sector equity analyst Roy Van Keulen says software is exempt from Trump’s new tariffs.
That means “most software companies won’t take a direct hit”, he said.
But he added, “Exceptions include Xero and SiteMinder [an ASX-listed hotel e-commerce platform], which have more economic sensitivity.”
“Potential medium-term impacts, if global aggregate demand decreases, include lower business formation rates and higher business failure rates, both of which can affect subscriber growth for Xero,” Van Keulen told the Herald.
“Additionally, Xero’s primary profit base is Australia, which is highly leveraged to China’s economy, which appears to be the primary target of the tariffs, given it is the primary rival to the global superpower, the US.”
Trade war-induced global economic slowdown fears did seem to be weighing on Xero, whose cloud-based accounting software is used by sole traders and small businesses around the world. Xero shares fell 4.66% to A$153.13 ($165) on Friday and tumbled further to A$134.90 in early Monday trading.
The Rod Drury-founded firm has not issued a market update since Trump’s “Liberation Day” speech.
“This is not something we’re commenting on. We remain focused on executing our strategy,” corporate communications director Simon Fitzgerald told the Herald.
Eroad shares were flat at 92c today (the stock is up 4.55% for the year).
Jarden said the maker of telematics systems for trucking fleets had only “limited exposure” to the new Trump tariffs, with 4% of its total revenue coming from hardware made in Asia for sale in the US. The bulk of Eroad’s revenue now comes from SaaS or monthly software-as-a-service subscriptions.
Rakon’s shares fell 4% to 49c on Friday but were flat in Monday midday trading after a Forsyth Barr note, issued this morning, said “Donald Trump’s ‘Liberation Day’ tariffs on US-bound imports will have a manageable impact on Rakon’s operations.
“We estimate the new US tariffs could have a negative impact of ~$1.7 million–$2.3m on our FY26 npat [net profit after tax] estimate,” analysts Will Twiss and James Linday said. Pre-‘Liberation Day’, the pair were picking an FY26 net profit of $8.5m.
In a market update, Rakon said approximately 15%–20% of its revenue comes from direct US sales, with about 85% of its US-bound hardware manufactured in New Zealand, 12% in France and just 3% in India.
The new tariffs impose duties of 10% on New Zealand-origin goods, 20% on French/EU goods and 26% on Indian imports.
“This results in a charge on Rakon’s US shipments equivalent to about 1%–2% of the company’s total revenue – a manageable headwind given its high gross margins,” the Forsyth Barr analysts said.
Rakon opened a 9000sq m manufacturing facility for its frequency control and timing solutions – which help chips in communications, data centre, satellite and communications systems keep in sync - in Bengaluru, India in 2023.
In March this year the company said it had completed the process of shifting “selected” manufacturing from NZ and France to the new plant.
Is there any intention to shift manufacturing from India?
“While Rakon is well-positioned to optimise its manufacturing and adapt to the changing conditions, we are taking the proactive first step to seek further clarity on both implementation and possible exemptions for the new tariffs, as well as monitoring the impact on customers, vendors and competitors,” a spokesman said.
In a market filing posted on Friday, Rakon said “The company is currently working to fully understand how the new US tariffs will be implemented and the implications for its business.”
Lindsay and Twiss said, “Rakon has spent the past one to two years enhancing manufacturing flexibility and shifting some product lines to India – though this does not appear to include products tied to its US-based revenue.
“We consider it too early to determine whether moving production back to New Zealand is possible or worthwhile in offering any significant advantage under the new tariff regime.”
Our market’s biggest stock was down 3.21% to $33.47 in late trading and is still up 29.83% over the past 12 months.
Jarden had been bracing for Fisher & Paykel to incur an extra $100m in costs per year, primarily because its Mexican manufacturing operations looked likely to be slapped with a 25% tariff on their exports to the US.
But in the event, goods compliant with the United States-Mexico-Canada Agreement (USMCA) incurred a nil tariff.
“Almost all Fisher & Paykel Healthcare products imported into the US from Mexico are currently compliant with the USMCA,” F&P said in a market update.
Jarden now expects the company to cop $30m in tariff-related costs.
“The likely Fisher & Paykel response would now be to lift Mexico plant volumes to the US and use NZ manufacturing to supply a higher proportion for rest of the world,” Forsyth Barr analyst Adrian Allbon said.
The sneakers worn by tech bros could be about to get more expensive, too.
Allbirds’ most recent list of its manufacturing partners, published in 2023, has all three of its footwear factories in Vietnam – one of the countries hit hardest by Liberation Day as Trump imposed a 46% tariff.
Vietnam has also been one of the first countries to offer negotiations, albeit from its Government’s position that its average tariff on US imports is 9.4%.
Trump has claimed Vietnam charges the US “90%”, a figure apparently based on Vietnam’s current trade surplus with the US, worth US$123.5 billion ($221.3b) – a figure Vietnam disputes.
The Kiwi-American firm’s Nasdaq-listed shares – which have already been under long-term pressure after a run of poor results – slid from US$6.80 before Trump’s speech to a Friday close of US$5.28, a 22.3% slump. (Update: Allbirds shares were down another 19.6% to US$2.25 in late Tuesday trading.)
Chris Keall is an Auckland-based member of the Herald’s business team. He joined the Herald in 2018 and is the technology editor and a senior business writer.
Peter Beck named Flying Kiwi.