Trade Minister Todd McClay says New Zealand’s longstanding friendship with the United States could be the government’s best card to play should Donald Trump be returned to the White House.
The Republican presidential candidate has promised to take the protectionist trade policies of his first term to a higher level should he be re-elected, with 10% to 20% tariffs on all imports.
China would be targeted with tariffs as high as 60% to raise revenue for the federal government and strengthen the US’s industrial base at the expense of its rival.
McClay told Farmers Weekly should Trump make it back in November, the government would strenuously argue that new tariffs were not in either NZ or the US’s interests.
“It would be very harmful and America would miss out on some great products that their consumers enjoy.”
The Center for American Progress Action Fund, a left-leaning think-tank, has calculated Trump’s tariffs would add US$3900 (about $6200) every year to the average US family’s living costs.
“That is why tariffs are very blunt and it does not necessarily bolster a domestic economy,” McClay said.
“In many cases it lessens choice and puts prices up for consumers.”
Fonterra’s trade strategy, sustainability and stakeholders affairs Americas manager James McVitty agreed.
“These levels of tariffs would be highly inflationary.
“NZ agricultural exports are often ingredients for further processing, support food manufacturing jobs in the US and are required to produce essential products in health and wellness, pharmaceutical, infant formula, medical and organic applications for consumers.”
During his presidency Trump’s tariffs tended to target countries with which the US had trade deficits.
McClay said the trade balance between the two countries has swung marginally in NZ’s favour since then.
“At that time NZ did not have one and it has changed now as a result of some the new areas we trade in in space and so on, but it is still a fairly balanced relationship and that is important.”
Aside from the economic rationale, McClay said the government would invoke NZ’s close and longstanding relationship with the US to argue for an exemption from any new Trump tariffs.
“The use of tariffs indiscriminately on those that you get on with has a greater impact than using them against those you get on with less.
“So we would very strongly advise against that but ultimately it will be for the next administration to decide what their policy is.
“But NZ is a good friend and if they want to do that they should be exempting us.”
However, Stephen Jacobi, the executive director of the International Business Forum, representing exporting heavyweights including Fonterra, Silver Fern Farms, ANZCO and kiwifruit marketer Zespri, said that relationship counted for little when NZ was caught by Trump’s 2018 steel tariffs. Those tariffs stayed in place despite NZ’s lobbying for them to be lifted.
Should NZ’s arguments for an exemption to a new round of Trump tariffs fail, the government’s reaction should be swift, joining inevitable legal challenges at the World Trade Organisation, Jacobi said.
“You couldn’t really retaliate against them until you had a World Trade Organisation case saying they were wrong.
“And we can’t really send a warship.
“I suppose we could send the Aratere but it might run into Mexico instead!”
While Kamala Harris is not proposing the same damaging tariffs as her Republican opponent, she has a record on free trade agreements in keeping with most of her Democratic Party colleagues, Jacobi said.
She voted against both the TransPacific Partnership and the US-Mexico-Canada free trade agreements while in the US Senate.
More encouragingly, her running mate, Tim Walz, is on record as saying he could not understand why the US did not have a free trade agreement with NZ.
“So we might have a friend at court, you never know,” Jacobi said.
