The unruly jungle that was international trade until two decades ago appears to be growing back.
Having been partially cleared by 20 years of widely respected rules-based global trade and free trade agreements, the jungle appears to be regrowing given the rhetoric of tariffs and trade protection coming from the two candidates in the US presidential elections, trade specialist Stephen Jacobi said.
Jacobi, the executive director of the NZ International Business forum said presidential candidate Donald Trump is talking of imposing tariffs on imports, especially from China, and US President Joe Biden greater support for domestic manufacturers.
Jacobi said Trump is talking of imposing a 10% tariff on all imports.
As a rule, any tariff above 5% is considered problematic, he said. It creates additional costs, risks and uncertainty.
Jacobi said his comments are made under the assumption that the elected president carries out these policies – but, he said, “risks abound”.
The US was the NZ primary sector’s second largest market for the year to June 2024, and our fastest growing.
For that year it took $2.2 billion in meat, $1.2bn in dairy and nearly $1bn in wine.
NZ has a 213,000 tonne beef quota negotiated through the World Trade Organisation (WTO), for which exporters pay a US4.4c/kg tariff. Any additional volume above that quota incurs a 26.4% tariff.
Dairy incurs a 1-2% tariff for products supplied within a quota but anything above that can be as high as 30%.
These quotas have not been filled in recent years.
Lamb incurs a US0.7c/kg tariff and mutton US2.8c/kg.
Jacobi said the imposition of further protectionist policies will further erode the already weakened role of the WTO as an arbiter of trade disputes.
By targeting tariffs on Chinese imports, the US will likely provoke a reaction that could create global trade uncertainty.
Meat Industry Association chief executive Sirma Karapeeva said the US is an important market for NZ meat exporters and the imposition of a 10% tariff would have a commercial impact.
Broader repercussions from countries retaliating to the imposition of tariffs is another risk for exporting countries such as NZ, but her members are limited in how they can relate other than through commercial decisions.
“It requires a NZ Inc approach.”
Justine Arroll, Fonterra’s manager of trade strategy and stakeholder affairs, said Fonterra monitors geopolitical developments across the markets it operates in.
Arroll said an international rules-based trading system that ensures countries abide by their international obligations remains critically important to NZ exporters.
A spokesperson for the Ministry of Foreign Affairs and Trade said the US is a close and long-standing partner and NZ will continue to work with US administrations.
The spokesperson said MFAT routinely assesses the potential foreign and trade policy impacts of major overseas elections and provides advice to ministers.
“This will be the case too for the US election later this year.
“We are following the public comments from both parties on tariffs and other measures and we will be talking to exporters over the period ahead.”
