I am aghast at the scale and breadth of last week’s announcement of additional tariffs by US President Donald Trump. They affect more than 100 countries and $US3 trillion of trade with tariffs of 34% on China, 24% on Japan, 20% on the EU and 10% on countries such as the UK, Australia and NZ. This is an economic earthquake that will affect every country and every city.
Our living standards depend on exports. Nelson, of 16 regions in NZ, has the second highest proportion of exports to GDP. Our economy depends on us being able to trade our seafood, apples, wood, hops, kiwifruit, wine, meat and dairy products.
The Trump tariffs are a radical change in the world order. Protectionism has been viewed globally as a failed economic policy. NZ has been at the forefront of liberalising trade under both National and Labour governments, and tariffs have been reducing globally for 40 years.
The worry with Trump’s tariffs is that they spark a global trade war. China swiftly responded with a 34% tariff on all US imports. The US Smoot-Hawley Tariff Act that raised tariffs in 1930 was an economic disaster, contributing to the Great Depression.
NZ is better placed for having diversified our export markets. We were very vulnerable in the 1970s when the UK took more than 50% of our exports and it joined the EEC (now EU). The US is NZ’s second largest trading partner with 14% of our exports. Nelson exporters have been scrambling over the past week to decipher the impact on their businesses.
The Government is handling NZ’s position well. Mice should stay out of the ring when the elephants are fighting. We have politely stated the policy’s flaws but not retaliated. We’ve done well to avoid a higher tariff. NZ has recently secured free trade agreements with the UK, EU and Gulf States. The PM last month got negotiations underway with India.
The turmoil will hurt Nelson. Our city needs to respond by broadening our global connections. We need to work even harder on our Sister City and other relationships with China, Europe, Japan and India and use them to help grow other markets.
