A potential Donald Trump presidency in the United States could bring significant changes to New Zealand’s economy, with proposed tariffs likely to impact exports, trade relationships, and local businesses. Here’s what it could mean for business owners.
1. Increased Tariffs on Exports
Trump has proposed imposing tariffs of up to 20% on all imported goods, which would include key New Zealand exports like beef. Such tariffs would reduce the competitiveness of New Zealand products in the US market, leading to decreased demand and squeezed profit margins for exporters. This scenario mirrors past challenges, such as the steel and aluminium tariffs that remained in place during the Biden administration.
2. Strained Trade Relationships
The introduction of higher tariffs could strain New Zealand’s trade relationship with the US, making it more challenging for local businesses to access this significant market. Additionally, if US free-trade partners like Australia are exempt from these tariffs, New Zealand could find itself at a competitive disadvantage, further complicating trade dynamics.
3. Shift Toward Protectionism
A return to protectionist policies reminiscent of the 1930s could undermine the rules-based international order that New Zealand relies on for fair trade. Such a shift would create uncertainty for business owners, making it difficult to plan for the future and potentially limiting access to international markets.
4. Potential Opportunities in China
If the US imposes high tariffs on China, leading to retaliatory measures, New Zealand might find increased opportunities in the Chinese market. China could seek alternative suppliers for agricultural products, presenting a chance for New Zealand exporters to fill the gap. However, this would require businesses to navigate complex geopolitical dynamics and ensure compliance with Chinese regulations.
5. Impact on Domestic Economy
The New Zealand economy is currently experiencing challenges, including a recession and rising unemployment, which reached 4.6% in the June 2024 quarter. Increased tariffs and strained trade relationships could exacerbate these issues, leading to further economic contraction and higher unemployment rates. Business owners may face reduced demand, increased costs, and tighter profit margins, making it essential to explore alternative markets and diversify product offerings.
6. Need for Strategic Adaptation
In light of these potential challenges, New Zealand business owners should consider strategies to mitigate risks, such as diversifying export markets, enhancing product value propositions, and staying informed about international trade developments. Engaging with trade organisations and government agencies can provide valuable support and resources to navigate this uncertain landscape.
Source: RNZ
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