Photo: AFP / ROBERTO SCHMIDT
An economist is warning New Zealand might soon be in the firing line for US tariffs amid an escalating global trade war.
The country has been caught up in the United States president's blanket 25 percent tariffs on steel and aluminium, which came into effect on Wednesday.
Australia's prime minister lashed the "entirely unjustified" tariffs being imposed on his country after failing to get an exemption, saying it is a poor way for the United States to treat a friend.
While the measures sparked swift retalitory tariffs from the European Union and Canada on some US goods, Sense Partners economist John Ballingall maintained it's the consequences for the global economy that New Zealand should be worried about and the depressing effect on the country's export demand.
Noting New Zealand's exports of steel and iron to the United States were valued at $65.5 million last year, Ballingall told Morning Report the direct economic impact of the tariffs would not be "enormous".
"There'll be some additional duties to be paid for by US importers, but the larger concern is what this portends for the global economy given we're already seeing retaliation."
He said the moves by trade partners had all the hallmarks of a global trade war and were creating huge uncertainty for global markets.
"If it looks like a trade war, and it talks like a trade war, and it quacks like a trade war - it's probably a trade war."
The result was that New Zealand's economic recovery was at significant risk, he said.
"Businesses thinking about where they're going to invest right now are probably just going to sit on their investment.
"Investors hate uncertainty, so what we're going to see is a slowdown of the global economy as firms hold back and consumers stop spending so much and that will decrease the demand for everything New Zealand exports."
Ballingall said all eyes would now be on the US trade partner's retalitory tariffs - signalled to come into effect in April.
New Zealand not in the firing line - yet
While other nations were embroiled in trading tariffs, Ballingall said New Zealand had by-and-large kept its head below the parapet.
"[It] hasn't really been in the firing line at all on any of these tariffs, we've been caught by the steel and aluminium one, but I struggle to think [Donald Trump's] really worried about New Zealand as a threat to the economy."
However, value-added taxes or goods and services taxes (GST) - applied to imported and domestically sourced goods - could come to bite us, he said.
Trump has threatened 'reciprocal tariffs' claiming it gives countries an unfair trade advantage.
Ballingall said despite economic arguments refuting Trump's position, GST left New Zealand exposed.
"He seems set on doing something with them. That's probably our largest vulnerability right now."
He said an ongoing downturn on Wall Street would likely halt the tit-for-tat tariff war.
Prices were already going up in North America, Ballingall said, which will soon filter through to consumers - the reality of which will bear out in the economic data in coming months.
"When that happens, consumers can't buy as much, they have less income to spend and that will start to depress economic activity globally.
"In my view, the only thing that's going to stop President Trump imposing more and more tariffs - is the power of markets," he said.
"If he continues to see lots of red on Wall Street indices he may start to rethink things."
Economic Minister Nicola Willis says the govt needs to reflect on the ramifications of an additional tax Photo: RNZ / Samuel Rillstone
Government to reflect on US tariffs
The Economic Minister Nicola Willis said she's assessing the blanket 25 percent US tariff on imported aluminium and steel, and the Government would only respond once the extent of the tariffs were understood.
She told Morning Report New Zealand already faced a tariff on such imports handed down by the the last Trump administration and the Government needed to reflect on the ramifications of an additional tax.
Willis said the goal was for the country to put its best foot forward and the Foreign Affairs Minister was tasked with doing that on an upcoming trip to Washington.
"We are going to be careful in the way that we act, because what we don't want here is rash decision-making."
She said tariffs were not good for the world and New Zealand preferred free-trade settings.
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