The global tariff war is no doubt unnerving many businesses involved in international trade, especially because it involves two of New Zealand’s most important trading partners, China and the United States.
In early April, US President Donald Trump revealed that goods from New Zealand would have an additional 10% tariff applied when entering the US.
A 25% sectoral tariff applies to US imports of steel, aluminium, automobiles and some automobile parts, instead of the additional 10% tariff.
Trump also announced an increase in additional “reciprocal” tariffs on imports from China to 125%, bringing the total US additional tariffs on China to 145% on top of the US’s standard tariff.
Since then, the two countries have agreed on a 90-day pause to allow for trade negotiations, beginning May 14. They have also temporarily lowered their tariffs on each other’s goods. In the meantime, businesses worldwide are stuck in limbo, uncertain about the outcome of negotiations.
The direct impacts
The good news for importers is that New Zealand, unlike some countries, is unlikely to retaliate against reciprocal tariffs by imposing new import tariffs on US goods. For exporters, it’s a different story.
Kelly Eckhold, chief economist at Westpac New Zealand, says: “Goods exports [to the US] totalled around $9 billion in 2024. So, a simple multiplication of the 10% additional tariff rate equates to a loss of export revenue of around $900 million per annum or 0.2% of annual GDP. However, the impact will not be evenly spread across industries.”
New Zealand’s largest exposure is meat, especially beef, with exports to the US totalling $2.6 billion in 2024 or 30% of all meat exports. The wine industry is also heavily exposed, with exports to the US accounting for 35% of its exports.
But Eckhold says there is scope to limit the impact. For example, exporters could increase their prices to US customers or divert goods to other markets.
Besides, he says the NZD/USD exchange rate is likely to depreciate and buffer the impact on New Zealand.
Meanwhile, law firm Bell Gully warns that simply exporting goods from New Zealand to the US does not guarantee the New Zealand tariff rate will apply. For example, it is conceivable that products manufactured in New Zealand from Chinese components could be treated as Chinese products when imported into the US.
“Even the transit of goods through a third country could have implications on the origin of those goods and whether free trade agreement concessions are available,” says Bell Gully.
The indirect impacts
McClay says his government is working to create new trade opportunities and reduce barriers for exporters in other countries.
The first round of negotiations for the India–New Zealand Free Trade Agreement (FTA) concluded successfully in New Delhi in May.
Plus, an upgraded ASEAN-Australia-New Zealand FTA took effect in April, strengthening New Zealand’s trade ties with Southeast Asia and Australia.
ASEAN — which includes Brunei Darussalam, Cambodia, Indonesia, Laos, Malaysia, Myanmar, the Philippines, Singapore, Thailand and Vietnam — is New Zealand’s fourth-largest trading partner. Combined with Australia, two-way trade under AANZFTA is worth more than $59 billion annually.
“Most of our goods already enter ASEAN markets tariff-free. This upgrade sharpens the rules for services, e-commerce and supply chains, giving Kiwi businesses the tools to trade more efficiently,” says McClay.
What should you do?
Law firm MinterEllisonRuddWatts provides some practical steps on dealing with higher US tariffs.
The first step is to identify which of your export products are affected and how. Then work out who is contractually responsible for paying the new tariffs and review your supply contracts to determine if renegotiation is possible or required in these circumstances.
Next up, reassess your pricing models. For example, should you pass on the tariff costs to US customers, absorb the costs or adjust your pricing models?
“Offering alternative value propositions can help maintain competitiveness,” says MinterEllisonRuddWatts, adding that it’s important to continuously assess competitor pricing and adjust strategies based on shifts in the US market and customer demand.
MinterEllisonRuddWatts also lists these alternative strategies for avoiding the new tariffs:
Duty drawbacks or exemptions: Some US importers may qualify for tariff exemptions or refunds under specific schemes, allowing them to recover duties paid.
Using US Free Trade Zones (FTZs): Consider storing goods in one of the 261 US FTZs to delay or avoid tariffs. Inventory can be held near US ports or customers, re-exported without tariffs or have tariffs applied only to the final products when entering the US market.
Consider third-country processing: Export semi-finished goods to a country with lower US import tariffs for final processing before entering the US to potentially reduce costs.
Expand digital and e-commerce channels: Direct-to-consumer sales — for example, through platforms like Amazon or Shopify — may help reduce US import duty liability.
You should also consider diversifying your export markets to reduce dependence on the US and assess whether you will require additional financing if you expect changes in your cash flow cycle.
Here, Trade Finance may be a good option. It helps you boost your purchasing power and can mitigate the political, economic, transport or trade risks associated with international trade. That could be handy given that the global tariff war could affect exchange rates, international demand and production costs.
Summary
Be sure to look at what you can expect from the global tariff war. It is likely to have ramifications for many businesses involved in international trade, especially because it involves two of New Zealand’s most important trading partners, China and the United States.
