America’s Threats of Tariffs
Since the election of President Donald Trump, tariffs have remained a central focus of America’s trade policy.
What are tariffs? Tariffs impose a duty tax on imported goods from other countries. If you export goods to America you must pay the tax to the US government. This is typically a percentage of the value of the product.
The main purpose of a tariff is usually to shift the demand away from imported goods to domestically produced goods.
Countries facing American tariffs: The threat of tariffs against Mexico, Canada and China came as a response to halt illegal immigration and stop illegal drugs flowing into America.
Now, more than 125 countries are facing tariffs imposed by the Trump administration. New Zealand currently faces a recently announced 10% tariff on goods exported to America. This will have an impact on all New Zealand’s exports to America.
In particular, it will affect our agricultural sector, including food and fibre, that accounts for around 81% of New Zealand’s total goods exports.
How will the tariffs affect us? America is one of New Zealand’s key markets. The new 10% tariff means that kiwi businesses could choose to either lower their prices to entice importers to keep buying their goods or sell their goods elsewhere.
New Zealand could feel the impact of tariffs on other countries as they will be less likely to import goods from New Zealand because of their reduced revenue. Other impacts New Zealand could potentially face include fluctuations of KiwiSaver, investments, our currency, shares and general uncertainty as the markets react to these tariffs.
Given that New Zealand is a small nation and we rely on trade, there are potential silver linings. We may see products from other countries being sold at a lower cost as manufacturers look beyond the American market and its tariffs.
There is a great deal of global volatility caused by the tariffs imposed by America. Given that these tariffs are continually changing, this is creating a huge amount of uncertainty about the future of world trade.
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