9:03 am today

'Impossible to see any winners' in Trump's tariff war

9:03 am today
US President Donald Trump speaks in the Roosevelt Room of the White House in Washington, DC, on 3 March , 2025.

US President Donald Trump. Photo: AFP / ROBERTO SCHMIDT

US President Donald Trump has "incredible power" to affect the financial fortunes of much of the world, one fund manager says - and there is a warning that his presidency is likely to leave New Zealand households worse off.

In recent days, Trump has talked about a 200 percent tariff on European alcohol and imposed a 25 percent tariff on steel and aluminium imports.

There was a warning on Thursday that New Zealand could be in the firing line - New Zealand's exports of steel and iron to the United States were valued at $65.5 million last year.

Economists say although Trump's election made some people better off when sharemarkets responded favourably, his moves since and the reaction to them had undone that.

Overall, his presidency was likely to leave New Zealanders worse off.

"I think it's hard to argue we will be better off," Westpac chief economist Kelly Eckhold said. "The shift to a more inward-focused America which aims to see reduced imports and a diminution of the rules-based international system seems quite likely to reduce opportunities for New Zealand, given we are a trading nation.

"More uncertainty and polarisation in financial markets possibly also makes it harder for New Zealand to fund itself on as good terms as might have been possible before."

He said how much worse off New Zealand was left would depend on details that were not yet clear, as well as how the rest of the world responded.

Simplicity chief economist Shamubeel Eaqub said most New Zealanders would see the immediate effect in their KiwiSaver balances, which have suffered as markets fell in response to the tariff war.

In the past, sharemarket movements might have been a "rich person problem", but KiwiSaver had made them relevant to a much wider cross-section of the population. He said while it was not really a concern for most people because KiwiSaver was for long-term savings, people could be psychologically affected.

"We feel bad news more acutely than good news."

He said tariffs and counter-tariffs would be a disruption to global trade, but it was not yet known to which countries and to what extent. Canada and Mexico were not big trading partners for New Zealand, but the US and China were.

The disruption could affect prices and trading volumes in a way that hurt exporters, particularly in the rural economy.

There could be some silver lining in some imports becoming cheaper if countries that previously exported to the US were looking for other markets for their exports.

People should focus on what hey could control, he said, in an environment where there was so much more external uncertainty. He said it would be particularly important that people took care of their "financial hygiene" such as looking at their personal finances and careers.

"Resilience will need to come from within."

Shamubeel Eaqub

Shamubeel Eaqub . Photo: RNZ

Rupert Carlyon, founder of KiwiSaver provider Koura, said New Zealanders, and most people around the world, were likely to be worse off.

"It is impossible to see any winners out of this new world we are entering into. Tariffs are likely to come on agricultural goods which will be bad for the NZ economy, though potentially offset by new opportunities in China, though we have different export profiles to those two markets.

"At the same time we have been walking a very fine line of using China to grow our economy and America for our strategic defence, I am not sure we will be able to do that in the future. "

John Berry, chief executive at Pathfinder, said it was impossible to predict what would happen in a "volatile, unstable, brittle world… It's entirely possible he says something quite extreme about New Zealand and it will have an impact on our currency trade and will impact our economy.

"It's incredible that one person has that power to have that impact. New Zealand could be vulnerable, but equally may stay on the right side of Trump and not have that hit."

He said most people's investments would be back at the level of pre-Trump.

"Markets have wound back some of the optimism and gains, It's a reflection of the unpredictability of the world we're in at the moment."

Trump would not be able to have both tariffs and reduced inflation, Berry said.

Kiwibank chief economist Jarrod Kerr.

Jarrod Kerr. Photo: Supplied / Gino Demeer

Jarrod Kerr, chief economist at Kiwibank, said it was still hard to tell what might lie ahead.

"It's simplistic to say, tariffs will hurt global growth and cause a bit of inflation. Both lower global growth and higher global inflation hurt New Zealanders. So that's not good. But things are never that simple.

"Goods made in China and destined for the US may be shipped via another nations that have lesser, or even no tariffs like Vietnam or New Zealand.

"I have been told by one large New Zealand company they're doing exactly that. They're importing for China with the intention of selling into the US. Kiwi ingenuity. That's good for some. I also agree with the argument it could be deflationary. So EVs that were made in China may be diverted away from the US down to New Zealand for a 30 percent discount. "

He said that could be good news for New Zealand households.

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