China’s commerce ministry has vowed to fight US tariffs 'to the end' after Donald Trump threatened them with new levies.
One ministry spokesperson has labelled these threats a 'mistake on top of a mistake' - and claimed China would not accept this.
Infometrics Principal Economist Brad Olsen says this is starting to resemble the beginning of a full-on trade war.
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Episode Transcript
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Speaker 1 (00:00):
Coming up Jamie McKay on the dairy fallout from Donald
Trump's tariffs, and we're head to Australia for the first
leader's debate. Albow and Dunton go face to face on
Sky News tonight. Plus we're with Indebrady in the UK
by seven o'clock. Right now, China's Commerce ministry is saying
it'll fight till the end over the Trump's tariffs. The
Chinese government spokesperson so, Trump obviously hit them with thirty
(00:22):
four percent, They replied with thirty four percent, and then
Trump had they replied thirty four percent. Trump now threatens
fifty percent on top of that if they continue with
their retaliation. Chinese government spokesperson has said the US threat
to escalate tariffs against China is a mistake on top
of a mistake. China will never accept this. Brad Olson
(00:44):
is in for the Metric's principal economists with US now, Hi, Brad,
good evening. Not great language, is it.
Speaker 2 (00:49):
It's pretty strong fighting talk from both sides. I mean,
you're right that thirty four percent to start with, but
let's be clear, there was already I think twenty percent
additional tariffs on China earlier in twenty twenty five. If
you take on top of that the tariffs that were
levied both by the original Trump administration back you know,
five six years ago, and also some of those under
Biden that haven't been walked back. You're talking in effective
(01:11):
tariff rate. If this COEs ahead, if there is this
escalation of over one hundred percent, you know, that means
that every Chinese product going into the US would be
costing more than double what it needs to. I mean,
this really is starting to look like a full blown trade.
Speaker 1 (01:23):
War, which we haven't seen before, right because we have
seen trade wars before, but we haven't seen any with
numbers this big, not.
Speaker 2 (01:31):
This big, and not this wide scale. I mean, this
is not sort of a few little products tit for
tat and similar. This is like everything at the wholesale
level you're hearing from the Chinese. They're looking at targeting
agricultural exports from the US. That's a big earner for
the United States. So this is much much wider. And
of course it's not just a one to one. It's
not just the China and the US. It's also the
(01:51):
EU are looking to retaliate. Canada has already done so
you've got to talk from the Mexicans as well about
wanting to go in like the wider broader effect of
this is worrying. You heard from the Finance Minister today
saying that Treasury's expectations are that global growth expectations have
now been slashed by half a percentage point from where
they originally thought things were. That makes it so much harder.
(02:12):
If you're a key exporter and you're seeing all of
these countries around the world fighting, putting tariffs on back
and forth. There is just going to be less trade,
less money to buy the stuff that we're sending out.
That's scary.
Speaker 1 (02:22):
When the Finance Minister says half a percent of global growth,
what does that mean for our growth number?
Speaker 2 (02:31):
It's not clear yet. We haven't heard the Treasury estimates.
I mean, and to be fair, you know, even the
private sector forecast is like us, we're still trying to
run the numbers and I don't think anyone's got a
lot of certainty or confidence now. I mean, you see
that also in the financial markets because everyone's still seeing
those cutbacks. But realistically, you know that slowdown that's coming through.
You could be talking a percentage point of GDP. That's
sort of just a very high level number, but in
(02:52):
terms of scarlet magnitude, it's big enough to care about,
and I think that's why there's so much interest in
this right you know, people are talking about the can
we save the balances right here right now because the
markets are down, But longer term, over the next six
months to a year, we are going to be talking
a lot more about, Hey, where are New Zealand's exports going?
Are we able to see quite as much out what's
coming through because we're all just sort of caught in
(03:13):
the middle of this mail strong because we don't know
what's next.
Speaker 1 (03:16):
Somebody described it to me as like if you have
a motive like spaghetti junction, a motivate with lots of
roads on it, and you're basically having trying to figure
out a new route and then work out what the
speed will be. You know, it's a really hard thing
to domine. Of course, we have GPS these days, that's
quite easy now, but you know, before we had that,
(03:36):
that's similar kind of thing. You're trying to get down
and squared.
Speaker 2 (03:40):
Definitely, and at the same time, right it's all the
rest of us who are watching, you know, we've seen
a crash happen, and now we're trying to figure out
who goes first to make sure that they can find
the new route. We all don't want to sort of
immediately pilon ourselves because they'll just come up the new
escape route. But we are all watching. Now what's everyone
else doing? What way are they starting to hear? They
taking road A, road B or road C. And I
think that's why it's interesting, Right, you've seen a number
(04:01):
of countries that have retaliated quite hard. You know, that's
escalating the trade war. You've seen a bunch of other countries,
particularly through parts of Asia, the likes of Japan Vietnam
have said, hey, can we negotiate. We're quite keen to
sort of see if we can lower this down. Then
you've got that sort of middle group like New Zealand,
we've gone, look, it's not in our best interest to
try and sort of put ourselves on the radar at
the moment, we're not being targeted. Let's just sort of
(04:22):
sit back, not watch peacefully, but just watch and wait
and learn. Because there's still a lot of water to
go into this bridge. We have five days into this
and already it's been chaos.
Speaker 1 (04:30):
We've got an OCR announcement tomorrow. If you're the Reserve Bank,
what do you do? Do you kind of because on
the one hand, you potentially got you know, inflation increasing,
on the other hand, you might have growth falling. It's
like you don't know which way is up and which
ways down? What do you do? Just just go with
what you indicated you might deliver broadly.
Speaker 2 (04:47):
I think at the moment, I think that's the best call.
I think anything otherwise would imply the Reserve Bank almost
knows too much, and it doesn't at this point. It's
only had the same amount of time that everyone else has.
If the Treasury hasn't been able to come out with
a fulsome this is what it means for the economy,
nor don't think the Reserve Bank will have either. Also, importantly,
that statement tomorrow that the Reserve Bank's issuing, there's only
(05:08):
a couple of pages of text. There's no big forecast.
They've only had a little bit of time. I think
asking them to come out with too firm of a
view at the moment risks sort of leading us down
one particular path because we're not sure how to toss
up between the likes of that lower growth and the
potential higher inflation. I think more appropriate would be the
reserve banks signaling tomorrow and say, look, yep, clearly a risk.
We're doing a lot of work on it. We're trying
(05:29):
to figure out where this lands. For the moment. The
New Zealand economy still in an all right place in
terms of where their forecasts are going, but requires that
official cash rate to come down a bit more. But
then they've got May when they can come out put
some full on forecasts out say this is what our
expectation is. And of course, look if things did deteriorate,
they can always have an impromptu meeting. They don't need
(05:49):
to in my view, but they've always got that option
up their sleeve. They've now got a governor in place
for the next six months in Christian hawksby very qualified individual.
I think we're in safe hands for the moment amidst
all of the term that's happening globally.
Speaker 1 (06:01):
Yeah, Well, because she just announced today, Nikola Willis did
that he'll get that six month job. He had the
immediate job after Adrian all left the building and a
sort of cloud of dust, and then he's got the
six month job and then they'll find the new But
crucially he is going to oversee the funding envelope for
the next five years for the Reserve Bank. So it's
quite a good deal for Nikola Willis, isn't it. She
gets the temporary one in the sign they signed the
(06:24):
funding agreement, which was obviously point of contention with Adrian
or and then the new one comes in and has
to live by presumably.
Speaker 2 (06:30):
Basically, but I think as well that's realistic. The government's
been pretty clear that everyone needs to live within their
means a bit more. The Reserve Bank has been spending
a lot of money, some of that completely justified, some
of it. I do think you've got a question should
they be able to spend quite as much as they
have been when everyone else has got to trim their
cloth a little bit more. I think it's appropriate they
find a bit more of a middle ground, and I'm
more than confident that between the likes of the Reserve
(06:52):
Bank Board, the Finance Minister, the governor, everything will work
out all right. But I do think there's got to be,
like we're seeing in a number of parts of the economy,
a recalibration what we were doing a couple of years
ago does not cut it these days. The world has
changed the economy has changed, and we've got to adapt
to it.
Speaker 1 (07:07):
Brad Awlsome, great to have you on the show. For
more from Hither Duplessy Allen Drive, listen live to news
talks it'd be from four pm weekdays, or follow the
podcast on iHeartRadio.
Coming up Jamie McKay on the dairy fallout from Donald
Trump's tariffs, and we're head to Australia for the first
leader's debate. Albow and Dunton go face to face on
Sky News tonight. Plus we're with Indebrady in the UK
by seven o'clock. Right now, China's Commerce ministry is saying
it'll fight till the end over the Trump's tariffs. The
Chinese government spokesperson so, Trump obviously hit them with thirty
(00:22):
four percent, They replied with thirty four percent, and then
Trump had they replied thirty four percent. Trump now threatens
fifty percent on top of that if they continue with
their retaliation. Chinese government spokesperson has said the US threat
to escalate tariffs against China is a mistake on top
of a mistake. China will never accept this. Brad Olson
(00:44):
is in for the Metric's principal economists with US now, Hi, Brad,
good evening. Not great language, is it.
Speaker 2 (00:49):
It's pretty strong fighting talk from both sides. I mean,
you're right that thirty four percent to start with, but
let's be clear, there was already I think twenty percent
additional tariffs on China earlier in twenty twenty five. If
you take on top of that the tariffs that were
levied both by the original Trump administration back you know,
five six years ago, and also some of those under
Biden that haven't been walked back. You're talking in effective
(01:11):
tariff rate. If this COEs ahead, if there is this
escalation of over one hundred percent, you know, that means
that every Chinese product going into the US would be
costing more than double what it needs to. I mean,
this really is starting to look like a full blown trade.
Speaker 1 (01:23):
War, which we haven't seen before, right because we have
seen trade wars before, but we haven't seen any with
numbers this big, not.
Speaker 2 (01:31):
This big, and not this wide scale. I mean, this
is not sort of a few little products tit for
tat and similar. This is like everything at the wholesale
level you're hearing from the Chinese. They're looking at targeting
agricultural exports from the US. That's a big earner for
the United States. So this is much much wider. And
of course it's not just a one to one. It's
not just the China and the US. It's also the
(01:51):
EU are looking to retaliate. Canada has already done so
you've got to talk from the Mexicans as well about
wanting to go in like the wider broader effect of
this is worrying. You heard from the Finance Minister today
saying that Treasury's expectations are that global growth expectations have
now been slashed by half a percentage point from where
they originally thought things were. That makes it so much harder.
(02:12):
If you're a key exporter and you're seeing all of
these countries around the world fighting, putting tariffs on back
and forth. There is just going to be less trade,
less money to buy the stuff that we're sending out.
That's scary.
Speaker 1 (02:22):
When the Finance Minister says half a percent of global growth,
what does that mean for our growth number?
Speaker 2 (02:31):
It's not clear yet. We haven't heard the Treasury estimates.
I mean, and to be fair, you know, even the
private sector forecast is like us, we're still trying to
run the numbers and I don't think anyone's got a
lot of certainty or confidence now. I mean, you see
that also in the financial markets because everyone's still seeing
those cutbacks. But realistically, you know that slowdown that's coming through.
You could be talking a percentage point of GDP. That's
sort of just a very high level number, but in
(02:52):
terms of scarlet magnitude, it's big enough to care about,
and I think that's why there's so much interest in
this right you know, people are talking about the can
we save the balances right here right now because the
markets are down, But longer term, over the next six
months to a year, we are going to be talking
a lot more about, Hey, where are New Zealand's exports going?
Are we able to see quite as much out what's
coming through because we're all just sort of caught in
(03:13):
the middle of this mail strong because we don't know
what's next.
Speaker 1 (03:16):
Somebody described it to me as like if you have
a motive like spaghetti junction, a motivate with lots of
roads on it, and you're basically having trying to figure
out a new route and then work out what the
speed will be. You know, it's a really hard thing
to domine. Of course, we have GPS these days, that's
quite easy now, but you know, before we had that,
(03:36):
that's similar kind of thing. You're trying to get down
and squared.
Speaker 2 (03:40):
Definitely, and at the same time, right it's all the
rest of us who are watching, you know, we've seen
a crash happen, and now we're trying to figure out
who goes first to make sure that they can find
the new route. We all don't want to sort of
immediately pilon ourselves because they'll just come up the new
escape route. But we are all watching. Now what's everyone
else doing? What way are they starting to hear? They
taking road A, road B or road C. And I
think that's why it's interesting, Right, you've seen a number
(04:01):
of countries that have retaliated quite hard. You know, that's
escalating the trade war. You've seen a bunch of other countries,
particularly through parts of Asia, the likes of Japan Vietnam
have said, hey, can we negotiate. We're quite keen to
sort of see if we can lower this down. Then
you've got that sort of middle group like New Zealand,
we've gone, look, it's not in our best interest to
try and sort of put ourselves on the radar at
the moment, we're not being targeted. Let's just sort of
(04:22):
sit back, not watch peacefully, but just watch and wait
and learn. Because there's still a lot of water to
go into this bridge. We have five days into this
and already it's been chaos.
Speaker 1 (04:30):
We've got an OCR announcement tomorrow. If you're the Reserve Bank,
what do you do? Do you kind of because on
the one hand, you potentially got you know, inflation increasing,
on the other hand, you might have growth falling. It's
like you don't know which way is up and which
ways down? What do you do? Just just go with
what you indicated you might deliver broadly.
Speaker 2 (04:47):
I think at the moment, I think that's the best call.
I think anything otherwise would imply the Reserve Bank almost
knows too much, and it doesn't at this point. It's
only had the same amount of time that everyone else has.
If the Treasury hasn't been able to come out with
a fulsome this is what it means for the economy,
nor don't think the Reserve Bank will have either. Also, importantly,
that statement tomorrow that the Reserve Bank's issuing, there's only
(05:08):
a couple of pages of text. There's no big forecast.
They've only had a little bit of time. I think
asking them to come out with too firm of a
view at the moment risks sort of leading us down
one particular path because we're not sure how to toss
up between the likes of that lower growth and the
potential higher inflation. I think more appropriate would be the
reserve banks signaling tomorrow and say, look, yep, clearly a risk.
We're doing a lot of work on it. We're trying
(05:29):
to figure out where this lands. For the moment. The
New Zealand economy still in an all right place in
terms of where their forecasts are going, but requires that
official cash rate to come down a bit more. But
then they've got May when they can come out put
some full on forecasts out say this is what our
expectation is. And of course, look if things did deteriorate,
they can always have an impromptu meeting. They don't need
(05:49):
to in my view, but they've always got that option
up their sleeve. They've now got a governor in place
for the next six months in Christian hawksby very qualified individual.
I think we're in safe hands for the moment amidst
all of the term that's happening globally.
Speaker 1 (06:01):
Yeah, Well, because she just announced today, Nikola Willis did
that he'll get that six month job. He had the
immediate job after Adrian all left the building and a
sort of cloud of dust, and then he's got the
six month job and then they'll find the new But
crucially he is going to oversee the funding envelope for
the next five years for the Reserve Bank. So it's
quite a good deal for Nikola Willis, isn't it. She
gets the temporary one in the sign they signed the
(06:24):
funding agreement, which was obviously point of contention with Adrian
or and then the new one comes in and has
to live by presumably.
Speaker 2 (06:30):
Basically, but I think as well that's realistic. The government's
been pretty clear that everyone needs to live within their
means a bit more. The Reserve Bank has been spending
a lot of money, some of that completely justified, some
of it. I do think you've got a question should
they be able to spend quite as much as they
have been when everyone else has got to trim their
cloth a little bit more. I think it's appropriate they
find a bit more of a middle ground, and I'm
more than confident that between the likes of the Reserve
(06:52):
Bank Board, the Finance Minister, the governor, everything will work
out all right. But I do think there's got to be,
like we're seeing in a number of parts of the economy,
a recalibration what we were doing a couple of years
ago does not cut it these days. The world has
changed the economy has changed, and we've got to adapt
to it.
Speaker 1 (07:07):
Brad Awlsome, great to have you on the show. For
more from Hither Duplessy Allen Drive, listen live to news
talks it'd be from four pm weekdays, or follow the
podcast on iHeartRadio.
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