Donald Trump’s return: New Zealand braces for impact of US trade policies – Editorial

Donald Trump takes the oath of office during the 60th presidential inauguration in the rotunda of the US Capitol in Washington. Photo / Getty Images

Editorial

THREE KEY FACTS

• In a wide-ranging inauguration speech, Donald Trump promised to send troops to the Mexico border, take back the Panama canal, “drill, baby, drill” for oil and put people on Mars.
• He also declared the Gulf of Mexico would be renamed the Gulf of America.
• Trump has identified Canada and Mexico as the first targets of his tariffs.

It’s said that when the United States sneezes, the world catches a cold. So, as Donald Trump takes office, it’s certain the ripples from his administration will still be felt down here at the bottom of the world.

Full of his trademark bombast, he promised during his inauguration yesterday to send troops to the Mexico border, take back the Panama canal, “drill, baby, drill” for oil, and put people on Mars.

He also declared the Gulf of Mexico would be renamed the Gulf of America.

Trump pronounced: “The golden age of America begins right now. From this day forward our country will flourish and be respected again all over the world.

“For many years, a radical and corrupt establishment has extracted power and wealth from our citizens, while the pillars of our society lay broken and seemingly in complete disrepair,” he said.

“From this moment on, America’s decline is over.”

He said the nation will soon be “greater, stronger, and far more exceptional than ever before” as he returns to office.

“I return to the presidency confident and optimistic that we are at the start of a thrilling new era of national success.”

The biggest impact on New Zealand is likely to be the introduction of tariffs – and the move could be both directly and indirectly felt by our economy.

Trump, since winning the election last November, has named Canada and Mexico as the first targets of his trade action.

As AUT Professor of Economics, Niven Winchester explained in December, this would have both positive and negative impacts for New Zealand.

“Because the tariffs will raise the price in the US of goods from targeted countries, New Zealand producers have an opportunity to increase their share of the US market,” Winchester said.

“Also, facing reduced US demand for their products, producers in targeted countries will increase their supply to New Zealand [and other countries]. Both effects will benefit New Zealand.

“However, there are downsides, too. The tariffs will decrease GDP in the targeted countries. In turn, this will reduce the amount of money those countries have to spend on New Zealand goods.

“And because many imports from targeted countries are used in US supply chains, the price of US goods [including those shipped to New Zealand] will increase.”

A bigger danger for New Zealand is if other countries – particularly China – retaliate with their own tariffs.

“The reaction of China will be pivotal,” ASB senior economist Mark Smith said. “Global growth would take a bigger hit. An increasingly volatile and more protectionist global backdrop could create significant headaches for New Zealand. New Zealand exporters will need to be nimble, particularly for those selling into US markets.”

Trump proved himself to be volatile during his last presidency – and there’s no reason we should expect more consistency this time around.

“The lesson for 2025 will be to expect the unexpected,” Smith said.