New Zealand Institute of Economic Research (Inc)
Media Release – 24 October 2024
Immediate release
The United States elections are upon us. This should be a worry for government and business since the challenges we face are outside of our experience and have created trade/economic mayhem in the past.
The destabilising effects of a Trump or Harris victory on the New Zealand economy will take time to work through, but the “impacts will be serious,” according to the NZIER in an Insight released today as part of NZIER’s Public Good Programme.
The current situation is a bad place to start – whoever gets in
The world trade landscape is dominated by Trump even though he has been out of office for four years. The US$300 billion of Chinese tariffs remain, and for good measure, Biden has added a further US$18 billion.
US tariffs and retaliation to those tariffs have had a chilling impact on the United States and world economies. Not only do we have the United States taking its ball and going home on trade policy, but it has also tried to slowly strangle the WTO by refusing to appoint judges to the appellate board, halting the dispute settlement process.
New Zealand exports to the United States are booming, but with the rest of the world not so much
The impact of the tariffs has been to push the US dollar up, making its exports less competitive and increasing prices at home. For New Zealand commodities, further tariffs might not be so bad from either Trump or Harris in the United States. “Trade may still remain steady despite the extra tariffs signalled by Trump,” said the paper’s author, Chris Nixon, Principal Economist at NZIER.
The real problem is that the United States is the engine of the world economy. Countries that have been exposed to the United States market have suffered and will suffer more. This negatively impacts the New Zealand economy since we are exporters to the world. “US exports may remain strong, but exports to the rest of the world will fall,” Nixon said.
Tariffs are a seductive cure-all
We know that tariffs are the answer to everything for Trump/Republicans. But the real worry is that Harris/Democrats will also be seduced by their allure. “We are very unlikely to see the United States do a backflip of tariff policy,” said Nixon. The odds are firmly stacked against the Harris/Democrats holding the rather flimsy line against the failed logic of tariffs. The world has been here before with the infamous Harley-Smott tariffs of the 1930s. “They may not have caused the Great Depression, but they did not help,” Nixon said.
Four things New Zealand can do
New Zealand needs to stick to its trade policy knitting. This means making every trade policy move a winner. The United States tariff policy threatens all small and medium-sized nations. This is fertile ground for New Zealand to use its trade policy credentials with the objective of forming coalitions that are willing to extract the most out of trade policy agreements. It should:
- Stay the course. Push for further agreements in the Middle East and India
- Project CER. Use parts of the CER agreement to create closer links with ASEAN and beyond
- Encourage paperless trade. It is more efficient and will lead to more trade between existing trade partners
- Create new trade. Encourage ASEAN, East Asia, and China to use New Zealand as a staging place for exports/imports to the growing South American market.
For further information, please contact:
Chris Nixon
Principal Economist
021 633 127, chris.nixon@nzier.org.nz
