Tariffs, Rules of Origin, and flow on effect to all NZ businesses

There is no doubt the world trading environment has markedly changed with impending tit-for-tat tariffs and other trading barriers being touted and introduced under the second President Trump ‘America first’ program. This is likely to have a direct impact on New Zealand (NZ) exporters, NZ importers and, potentially, anyone trading just domestically with no export markets in their mix.

I will lay my cards directly on the table.
Tariffs and other trade barriers do not work.

They create a disincentive for technological advances, a dysfunctional basis for capital investment, less choice for consumers, and domestic inflation in the country imposing those barriers, making those households less wealthy to purchase goods.

America and China have been imposing various tariffs and duties on each other for many years now; the consequence of that has been the shifting of manufacturing capacity from China to neighbouring countries. I have personally assisted clients moving from China to Vietnam and the Philippines particularly. I note Thailand has also benefited significantly from the US/China trade biff. 

But now America is looking at tariffs and duties for any country that has a trading surplus with the United States of America (US). If you look at the balance of trade deficit for the US you can see why tariffs are a tempting tool, with 2024 being the worst on record with a massive global trade deficit of US$1.1trillion. Australia will not be on Trump’s hit list, as the US has a significant positive trade balance. But NZ might be, as we have a US$3.5b trade surplus with the US. And many countries NZ has significant trade with, will definitely be in Trump’s sights.

However, in the context of the trade deficit with China (US$400b in 2024), NZ is a small fry.

Apart from steel and aluminium, you could be forgiven for thinking NZ might be left out of the tariff and duty fray. Unfortunately, I don’t think so.

My recent discussions with exporters say they have already noticed murmurings in markets outside the US. Companies expecting tariffs to be imposed on their exports to the US are looking at different markets to sell their goods. Exporters to Europe and Korea already see that in their particular market segments. So, the impact on NZ exporters is both the tariffs for exports to the US and increased competition in the other markets they export to. One of these commented that the wholesaler wanted to reduce the exporter’s margin for the next four-year supply agreement if they wanted to continue to supply to them, as they expected to be contacted by many other entities previously exporting beef and honey products to the US.

New Zealand is fortunate.

Actually, that is a poor choice of words, particularly in the context of the Organisation for Economic Cooperation and Development (OECD) ranking. With a population of only 5.2m and a wealth index consistently dropping on the OECD index, NZ is probably not seen as a prime place to invest time and money into opening markets for companies looking for alternatives to the US. But Australia is definitely going to be on that list as a destination. That has a twofold risk:

1. Australia is a large export market for NZ companies, so you need to plan for increased competition in that market; and
2. Companies might look to Australasia for those new markets, bringing NZ into their plan.

That would have a direct impact on NZ companies that have no export markets at all. Increased competition in the NZ domestic market as new foreign companies enter the NZ market would directly impact on all trading companies. And importers, you might have more choices to choose who to import from, giving you the edge in negotiations. However, new entrants can also easily turn tail, leaving you potentially exposed later on.

The other issue is going to be around Rules of Origin (ROO). Some of you will already have tracking systems to ensure your ROO meets the requirements to avoid tariffs already in place. For those that don’t yet have those, you need to start putting that into place. You don’t want to go to a market and then have to try and prove your ROO keeps you tariff-free or at least at the lower end of the tariff range.

There are strategies you can use to take advantage of changes and mitigate the risk to you. These are often specific to entities, markets, and your industry. Come in and talk to Bruce, Brent or me about some of those strategies to keep you ahead of the pack in 2025. You can get in touch with us here.

Whatever you do, tariffs and duties will likely directly impact you, so ensure you have plans in place now.