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April 2, 2025 13 mins

President Donald Trump today announced sweeping tariffs on more than 125 countries, including 10 percent on imports coming from New Zealand.

One expert is warning New Zealand could also feel the ripple effects of tariffs being imposed on countries like China and Australia.

New Zealand International Business Forum Executive Director Stephen Jacobi explained the effects could be wide-ranging.

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Speaker 1 (00:09):
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Speaker 2 (00:17):
The biggest story in New Zealand at the moment. New
Zealand isn't being exempted from Donald trump sweeping tariff planned.
The US President has announced ten percent tariff's on almost
all imports to the United States. To discuss this further,
we're joined by Stephen Jacobe. He's a former diplomat, policy
advisor and Industry Associate Association CEO. He is well known

(00:37):
as an expert on trade and economic issues in New
Zealand and joins us now.

Speaker 3 (00:41):
Very good afternoon, Stephen, Yes, hello to you.

Speaker 4 (00:46):
Now, Stephen, very basically because a lot of people, I
don't think understand tariff's at all. For people who might
be an idiot and don't get it, how do tariff's work,
Where are they applied, who pays for them? And where
does the money collected go.

Speaker 3 (01:00):
So, when New Zealand exports are product to the United States,
for instance, the United States government may or may not
charge a tariff a duty a percentage of the goods
value as it enters the country, and that is paid
for by the importer. Of the products not paid by

(01:21):
the exporter. It's paid by the importer, and the importer
generally passes that cost on to the purchaser of that
good and on to the final consumer. So in this example,
the tariff is attack that's paid for by consumers in
the United States.

Speaker 4 (01:41):
Now, we hear a lot about the negative parts of
tariffs from our perspective, but it's not random. Can you
steal man the Trump administration's reasons for putting these tariffs
in place.

Speaker 3 (01:52):
Well, if you read through the nine pages or so
of the executive order released by the President, you'll see
quite a lot of justification for this, primarily because he
considers that imbalances an international trade of heated a national
security problem for the United States. So this is, you know,

(02:14):
our exports of beef for McDonald's is causing a massive
national security problem for the United States, and therefore he
is being led to put in place actions to correct this,
which will in the process bring more business and manufacturing

(02:35):
to establish itself in the United States and boost the economy.
You know, there are lots of aspects to this argument,
but that's the central one.

Speaker 4 (02:46):
Because you can see it if you had a company
that was manufacturing cars in the United States, and then
they moved their factory to Mexico for the cheaper labor,
and then just selling the cars back to America. You
can see how that would be gutting for you know,
the car manufacturing industry in America.

Speaker 3 (03:08):
Well, of course that's not quite the way it works,
because what happens in that particular example is that, yes,
some things are outsourced for production in Mexico, but in
fact what Mexico is doing is they are making parts
for the final car that is constructed in the United States.
In fact, parts flow back and forth across the border

(03:31):
for a variety of reasons. You know, I guess lower
cost production, sure, but also the ability to have very
long runs to reduce the unit cost of things produced.
So you know, to say that you can make everything
in one country today is actually a pretty tall order.
And then the motor vehicle example is pretty much the case.

Speaker 2 (03:53):
Here.

Speaker 3 (03:53):
You've got products moving all over North America to make
these cars. If you actually restrict that, you raise the
cost of manufacturing in the United States, you make them
unappealing an attractive, unaffordable to ess consumers, and they either
don't buy a car or buy from somewhere else.

Speaker 4 (04:09):
But some car manufacturers have moved their plants out of
the United States because it's cheaper to make the cars
outside the United States. That's true, though, wasn't it.

Speaker 3 (04:18):
They have moved part of the manufacturing process out of
the United States, that's right. But they have retained a
lot of manufacturing in the United States so they can
have an integrated manufacturing across North America.

Speaker 4 (04:31):
So that hasn't been responsible for the losses and jobs
in manufacturing in America.

Speaker 3 (04:39):
Well, I guess President Trump would argue that it has,
but of course also be argued that has actually preserved
jobs and created new ones by making cars that overall
are cheaper.

Speaker 2 (04:49):
Stephen, there's a question that's come via our text machine here,
and I understand some countries have had this applied to
them with these new terriffs. But the question is will
new towers apply to small individual purchases from we retail
websites to a private individual. Currently they can import US
eight hundred dollars. Do we know that level of detail?

Speaker 3 (05:08):
Yen. Yeah, that's called a dem minimus transaction. And this
is in the United States, right, So consumers in those
states can buy these and import them. You know, it's
the sort of thing you might buy from an international
you know, you know, website or something. Previously they were exempt,

(05:29):
but now they are going to be charged to full duty.

Speaker 4 (05:33):
We're talking to Steven Jacobe, former diplomat and trade experts
from a New Zealand perspective. How much does our low
dollar offset the impact of these ten percent tariffs.

Speaker 3 (05:45):
You know, to a certain extent, that's right, you know,
appreciation depreciation and the dollar which moves around can offset
some of this. And this tariff has been put on
at ten percent right for New Zealand, which is at
the low lowest end of the scale that they've adopted.
And you might have, you know, even up to a
five percent swing in the exchange rate that would have

(06:06):
an effect here. But bear in mind, by the way,
it's an additional ten percent tariff, it's not just ten percent.
So and of course a lot of our exports have
been going to the United States duty free, but in
some cases we do pay a tariff, generally not a
high tariff, except on some agricultural items. So some aspects

(06:28):
of dairy trade, for example s l Asbury high tariffs
and sometimes we trade over those twerts. We're going to
phase ten percent on top now, so the level of
pain will be felt differently across different sectors. And the
other aspect to bear in mind is that some of
our competitors in the US market are being taxed more

(06:48):
than US. So, for example, the European Union is being
taxed an additional tariff of twenty percent. That's going to
be significant for our wine exports, for.

Speaker 2 (06:56):
Example, as it's the importer that pays the tariff. Steve
the no New Zealand export is likely to drop the
export prices to compensate the importer or is it a
case of living with a possible reduction that demand?

Speaker 3 (07:09):
Yeah, well this is this is I mean, both is
probably correct. Some exporters will want to help their you know,
their distributors in the United States to keep you know,
price increases to a reasonable level. They may want to
share the pain, for example, or they might want to
they might want to seek to divert their you know,

(07:32):
exports off to other markets, or they might just suck
it up. So you know, it's going to vary across
different sectors according to different relationships and how the market reacts.
I mean, because of course you know, one big factor
here is is you know, how our competitors are being
treated our foreign competitors. But the other factor is can

(07:52):
the US you know, industry step up and supply the
products that we all have been supplying in all cases
is most unlikely to be the case. You take our
largest export beef into McDonald's, that's one point eight billion
dollars worth of exports, plays of very small tariff at
the moment. It might be subject to a plus ten percent,

(08:12):
but it's being part of a manifact of a food
processing chain in the United States. So how that exactly
works out will be very interesting to see.

Speaker 4 (08:23):
Now, tariff's on a new thing. We're talking about the
lot because the US is the biggest economy in the world.
But Canada has had some big tariffs on New Zealand
and the EU has. Are we still taking Canada to
court with the when we take in Canada to the
wto the World Trade Organization over their tariffs on us.

Speaker 3 (08:40):
That's right, that's right. They haven't implemented their undertakings to
US in the context of the TPP Trade Agreement, and
so we're taking them to dispute settlement process. But you know,
that's kind of. It's an important thing and a big thing,
and we should be doing it, but it's a small
thing compared to what we're seeing in the United States
at the moment. You know, Canada is not putting tariffs

(09:02):
on us on all products. They should be meeting their
international obligations. What the United States is doing is quite
a lot more. In the case of the EU that
you mentioned. Of course, we've got a new trade agreement
with the EU that has reduced some tariffs, but not
all tariffs. And you know, I think that trade agreement
and other ones we have, including TPP or CPTPP as

(09:26):
it's called. Now, are we going to become more important
to us as we move forward into this new kind
of tariff world that we're seeing open up before our eyes.

Speaker 4 (09:34):
Now, America has a huge amount of debt, and the
debt is growing all the time, and they look around
the world and see these deficits of trade. And if
you're the Trump administration, you believe that America is being
ripped off. Is there any truth to that? Have they
been basically subsidizing the rest of the world as has

(09:55):
been suggested?

Speaker 3 (09:57):
Well, I don't think so, because after all, they have
made sovereign decisions to lower their tariffs in the context
of trade agreements, in the context of international trade negotiations.
These deals have been done and they have been ratified
by the Congress. There have been processes around these things.
You know. You know, it's true that, I mean, it

(10:20):
is the case and in some areas their trading partners
impose greater tariffs on them than they impose on their
trading partner. In fact, we've got a few things like
that for US. But you know, the way to deal
with these things is to negotiate the reduction of tariffs
and other trade barriers in the context of trade agreements.
We have been seeking a trade agreement with the United

(10:42):
States for a long time, as you know, so I
don't think that really, you know, holds things up. And
you know, when you think about this business of who's
ripping off who I mean our tariff applied tariff right
to US goods entering news in it is one point
eight percent, not betwenty percent that the US administration claims

(11:03):
is being applied.

Speaker 4 (11:04):
Yeah, they can confuse with zest on that they are
they adding the GST to that is that what's going.

Speaker 3 (11:08):
On there, you know, to be perfect to think. I
think it's a lot simpler than that. They have simply
looked at the trade deficit. Their assessment of the trade
deficit that we have with the United States, which is
quite small and according to American figures, about one point
three billion dollars, and they have divided it by the
total by total trade between New Zealand and the United States,

(11:30):
and they've come out with a figure close to twenty percent.
I don't really think they've taken the GSD into it.

Speaker 4 (11:36):
Do we have the ability to cr We got the
access to correct them on things like that and maybe
get a TARFF changed.

Speaker 3 (11:44):
Well. The Executive Order says that makes clear that yes,
there is a room for negotiation if countries bring their
trade regimes into a line with that of the United States.
In the United States to be prepared to consider, you know,
decreasing or limiting the application of these towers. But now
what's going to see, of course, is one hundred and
eighty five trading partners around the world or seeking to

(12:06):
try to do that. We do need to, we do need.

Speaker 4 (12:10):
We need we need to get over there right now
and start knocking on the door and getting in the
queue and getting hurt.

Speaker 3 (12:15):
But bear in mind, you know, having said that, and
you know, tariffs are mad and we have it's going
to have a it's going to be painful for news
in and exports, no doubt. But we are in the
least terrified group. So there are others that have got
much greater problems than us, and including a number of

(12:36):
you know, you know, substantial economies like the European Union
twenty percent, or in India twenty seven percent, you know,
Israel seventeen percent, of staunch ally of the United States,
a number of ones in Southeast Asia, and here I say,
even in the Pacific, why did.

Speaker 4 (12:52):
They go to They went to Cambodia pretty hard as well,
forty nine percent.

Speaker 3 (12:56):
I mean for a least developed economy like Cambodia. Frankly
that I find that splicable when the rest of the
world is giving you know, duty free access of a
lot of these countries. But there's also Fiji thirty two percent,
in Vanuatu twenty three percent. They're even taxing the Norfolk
Island at twenty nine percent. I don't know what in

(13:16):
earth Norfolk Island that much.

Speaker 2 (13:22):
Stephen, fascinating times and thank you very much for giving
us some time today. Really appreciate it.

Speaker 3 (13:28):
You're very welcome. More to watch on the space.

Speaker 2 (13:30):
Absolutely there is. That is Stephen Jacoby, Executive director of
the International Business Forum, an international trade specialist.

Speaker 1 (13:38):
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