What the Trump administration might mean for New Zealand trade

New Zealanders may see cheaper electric vehicles and more expensive international travel under the second Trump administration.

The US Congress has officially certified Donald Trump's election victory ahead of him being sworn in and officially taking office on 20 January.

Sanders Unsworth partner Charles Finney was New Zealand's lead negotiator of the China-New Zealand Free Trade Agreement in 2008.

He's among those closely watching the United States now and spoke to RNZ about what it may mean for New Zealand shoppers and trade.

An era of 'unpredictability'

Finney said any question about the trade implications of Trump's re-election were complex and, perhaps most importantly, unpredictable.

"He'll say one thing one day and do something else another; he'll talk to someone who has a different view and change his mind completely on the subject so it can be a bit all over the place," Finney said.

"It's going to mean uncertainty. We know he's won and we are now knowing more about who he's going to have around him but as we saw last time around, things are not terribly predictable."

Finney said it was already clear Trump would continue to pursue an 'America-first' agenda and use trade to coerce others to do things he wants them to do.

"It seems the initial targets will be more China, Canada, Mexico and the EU than New Zealand, but he's also talked about possibly introducing a global tariff to raise revenue so he can cut taxes.

"That is potentially very problematic for New Zealand because it will mean that all our exports to the United States would be paying a tariff of either 10 or 20 percent and in pretty much all cases tariffs are much lower than that at present."

The 'indirect' impacts of tariffs on China

Finney said if Trump did hit China with high tariffs it would disrupt trade flows in the Asia Pacific, creating both risks and opportunities for New Zealand.

"He's been talking about both discouraging American companies from investing, encouraging companies to remove investments from China and he's also talking about very high tariffs on Chinese products and that will mean that number of Chinese products that currently go to the United States will no longer be able to go to the United States."

Finney said while that could risk the Chinese economy slowing down and hurting demand for New Zealand products, it wasn't all bad news.

"It will also potentially mean opportunity because China is likely to be retaliating against some US products. It might mean less US wine, meat and dairy products going into China and they are still going to need that product from somewhere and New Zealand will be well placed to fill those gaps."

There were other positives too, Finney added

"The price of Chinese products, in the short term anyway, is likely to be a bit lower. They'll be desperate to find markets elsewhere and so that will mean potentially lower priced goods coming to New Zealand."

But things would get more complicated in the longer term, Finney said.

"China will probably look at its exchange rate against the United States and other currencies as a mechanism by which they can adjust to Trump's tariffs.

"It would mean that our goods will probably be more expensive when going into China."

How fast could things change?

The speed at which Trump might start taking action after Inauguration Day, on 21 January (NZT), was also uncertain and hotly debated, Finney said.

"Trump has a habit of issuing executive orders but when it comes to tariff increases, he's slightly constrained by US law."

"He might be able to justify certain tariffs on national security grounds but I don't think he can justify a universal tariff applying to all imports from all over the world by executive order."

Finney said Trump would likely need support by Congress for sweeping tariffs, meaning they would take longer to implement.

Things were different when it came to dumping trade agreements though and New Zealand may be affected by this, Finney said.

"One of the first things he did last time around was rip up the TPP agreement, saying it was the worst agreement ever.

"There is an agreement the Indo Pacific economic agreement that the Biden administration signed recently, New Zealand is party to that, that does a lot of work in the trade facilitation space. He could rip that up. He likes theatrics. It wouldn't be the end of the world in my view but he could do that."

The silver lining of New Zealand's irrelevance

New Zealand, in an economic sense at least, is just not that important to the United States, Finney said.

"I don't think Trump has got New Zealand in his sights in any way, so that's the good news, and we also don't have a huge trade surplus with the United States," he said.

"It think we're the the 90th largest trading partner with the United States."

Trump visited Auckland in August 1993 for a day of meetings as a casino tycoon, having held a stake in a company bidding to be a casino operator.

Local papers, including the Sunday Star, reported his trip coincided with stormy weather but he still remarked, "Nice city. Reminds me of San Francisco," during the wet Auckland evening.

"I think Trump's well disposed to New Zealand," Finney said.

"He's been here. He knows about New Zealand and the people around him will be wanting to see New Zealand continue to play the role we have been playing in terms of the security and military relationship, which is getting increasingly close."

Finney said the United States was aware of China's interest in expanding its influence and will want to ensure New Zealand keeps its distance.

"They won't be wanting New Zealand to take one look at what's going on with the United States and becoming even more dependent on China than we already are.

"So I think in a political security sense, those relationships matter. In an economic sense we just don't count. We're not a high priority."

What will we see or feel in the coming months?

Finney said Trump's second administration may see the US dollar appreciate against many other currencies, including New Zealand's.

International travel will be more expensive but goods people in shops and supermarkets might actually get a little cheaper, he said.

"There will be product disrupted from the United States that will have to go elsewhere and some of it will come here, and that's good news for the New Zealand consumer."

Finney said electric vehicles may also become more affordable.

"If you want to buy an electric car over the next couple of years I'm sure there'll be some really good deals because product that would normally probably be going to United States will not be and manufacturers will be looking elsewhere, and New Zealand will be one of those markets."

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