New Zealand could get caught up in America's new trade policy, Photo /NZ Herald
New Zealand could get caught up in America's new trade policy, Photo /NZ Herald
New Zealand has begun to feel the indirect impact of new United States trade tariffs, which come into force this week.
Fisher & Paykel Healthcare (FPH) expects its costs to increase under a new US tariff regime but doesn’t expect the move to have a material impact onits net profit in the current financial year.
However, that did not stop shares in New Zealand’s biggest NZX-listed company being sold down, taking the benchmark S&P/NZX50 index with it.
Over the weekend, the US announced a 25% tariff would be imposed on products imported from Mexico and Canada and a 10% tariff on products imported from China with effect from this week.
About 45% of FPH’s products are made in Mexico and 55% in New Zealand.
Sirma Karapeeva, chief executive of the Meat Industry Association, said it was too early to speculate on whether, or how, the imposing of these tariffs will affect New Zealand red meat exports.
“However, as an export-facing economy, New Zealand exporters are responsive to the dynamics of the global market and maintain strong commercial relationships to keep our options open so we can be flexible and adapt as necessary,” she said.
New Zealand is a complementary trading partner to many markets and the red meat sector has a robust trade strategy with access to more than 100 markets, she said.
“In general, New Zealand has long-standing and positive trading relationships with many markets, including the US.
Meat Industry Association chief executive Sirma Karapeeva.
“This helps to address any issues as they arise,” she said.
“New Zealand has always considered tariffs to be distortive to global markets and, ultimately, not only do exporters and producers have to accept lower prices, but consumers are left with less choice and higher costs,” she said.
ASB chief economist Nick Tuffley said New Zealand could feel the impact, particularly if the 10% tariff on Chinese-US exports hurts the People’s Republic of China – New Zealand’s number one export destination.
“Yes, we are going to see some fallout because 80% of Canada’s and Mexico’s respective exports to go the US,” Tuffley said.
“For us, it’s the impact on China that we need to think about,” he said.
“There is likely to be some impact because this is not helpful for the Chinese economy.
“And there’s a risk that it will take the edge off what we export to China.”
However, New Zealand exporters will benefit from the weaker New Zealand dollar, which has continued its decline since US President Donald Trump returned to power.
“It does not look like it’s world-ending, but we are going to have to be mindful of some of the impacts coming through, with the prospect of Chinese consumers becoming more cautious at a time when their growth outlook has not been brilliant.
“If I was looking for a silver lining – and there is usually not much silver when it comes to trade wars – more of China’s exports could be diverted to countries like New Zealand, which could help our inflation story and purchasing power.”
Tuffley said the economic growth in all four countries caught up in the tariff wrangle was likely to see lower economic growth as a result.
“And global growth is likely to be slower because tariffs will just push up the cost of consumption.”
Kimberly Crewther, executive director at Dairy Companies Association of New Zealand, said there would be no direct impact from the tariffs but they would further complicate an already complicated world trade scene.
Crewther said a global trade environment that leaned more towards trade liberalisation was better for dairy than one that leaned towards greater protectionism.
“That’s simply because dairy benefits from economic growth and open trade is better for economic growth,” she said.
“Taking that general premise, what we’ve seen over the weekend is quite different in terms of trade development to an environment that supports economic growth, and that’s with the series of tariffs and likely tariff countermeasures.”
Jamie Gray is an Auckland-based journalist, covering the financial markets and the primary sector. He joined the Herald in 2011.
