Trump’s new tariff offensive shows why NZ can’t afford to be complacent – Fran O’Sullivan
Just when New Zealand exporters thought the worst of Donald Trump’s trade wars were behind them, the United States President has demonstrated a remarkable capacity for reinvention.
This week, the Trump Administration unveiled plans that could ultimately see New Zealand goods hit with a 12.5% tariff under a sweeping new trade regime justified by concerns about the use of forced labour throughout global supply chains – an allegation that in New Zealand’s case is denied by Trade Minister Todd McClay, who said the proposed impost was “unjustified”.
New Zealand’s direct exports to the US have been growing strongly. The US has become one of our most important export destinations for premium food, wine, technology and specialised manufacturing products. It has become the market of choice for high-tech companies wanting to achieve “unicorn” status – like Sir Peter Beck’s Rocket Lab, Craig Piggott’s Halter and Jamie Beaton’s Crimson Education – who each went there to “scale up”. And for many companies, America is viewed as the next logical growth market as China slows and global conditions become more uncertain.
A 12.5% tariff may not sound a lot. But in highly competitive export markets, it can be the difference between winning and losing business. So far, New Zealand beef and kiwifruit are spared from the threatened tariffs. They are not produced in great quantities in the US.
It’s tempting to observe Trump’s evolving tariff strategy appears more driven by late-night social media posts rather than logic. That is facile.
He was clearly angered when the US Supreme Court ruled on February 20 that the President’s use of the International Emergency Economic Powers Act (IEEPA) to earlier impose sweeping worldwide tariffs was illegal.
Following the court’s ruling, many New Zealand businesses felt they had a reprieve from Trump’s first round of tariffs; some instructed their representatives to seek rebates.
But New Zealand is one of 60 nations now affected after an investigation using Section 301 of the Trade Act of 1974, a US law allowing the Office of the US Trade Representative (USTR) to investigate and impose retaliatory tariffs on foreign trading partners for “unreasonable, unjustifiable, or discriminatory” practices that burden US commerce.
The new strategy – advocated by the US Trade Representative Jamieson Greer – is potentially far more dangerous for trading nations like New Zealand. It is still subject to consultation and a round of hearings on July 7 in Washington DC.
The US Trade Representative has alleged: “The failure of our most important trading partners to address the importation of goods made with forced labour is unacceptable.
“This creates a dynamic where American workers are forced to compete globally on an uneven playing field. We will no longer tolerate this disparity.
“Some trading partners have taken initial steps to prevent the importation of forced labour. However, each of our trading partners must do more to ensure that trade does not perversely encourage and entrench forced labour globally.”
The Luxon Government has spent considerable diplomatic capital strengthening ties with Washington while simultaneously expanding New Zealand’s extensive commercial links across Asia. That balancing act becomes much harder if the US increasingly demands that its trading partners align with its economic and strategic priorities.
As a visiting Indian business diplomat put it to me this week, it’s not China applying coercive tactics right now.
There is also a broader geopolitical dimension.
The proposed tariff regime arrives as competition between the US and China intensifies across technology, manufacturing, investment and national security.
The uncomfortable reality is that New Zealand’s economic interests largely remain deeply tied to China, while its strategic relationships are increasingly anchored in the US and its allies – as was clear from statements by US Secretary of War Pete Hegseth at the recent Shangri-La Dialogue where he criticised New Zealand’s level of defence spending.
Last month, New Zealand foreign affairs officials participated in confidential bilateral consultations with the USTR and other US officials as part of the investigation. New Zealand’s case – which built on a written public submission – consisted of three parts, with the first two aimed at addressing the components of the section 301 investigation:
- That New Zealand’s acts, policies and processes show that we have taken action to address forced labour in New Zealand, in other countries, and through supply chains;
- There is no evidence that New Zealand is harming US commerce through our forced labour settings (and a lack of a specific import ban on goods made with forced labour);
- That New Zealand is not the cause of the broader problems the US is seeking to solve.
New Zealand businesses should not place too much faith in the outcome of the July hearing.
The forced-labour investigation is only one front in a much wider campaign. The Administration is already examining manufacturing capacity, supply chains and other areas where further tariffs could be imposed.
Under this approach, tariffs are no longer temporary negotiating tools. They become instruments of industrial policy, geopolitical leverage and domestic political strategy.
The underlying message is clear: if one route is blocked, Trump will simply find another.
Catch up on the debates that dominated the week by signing up to our Opinion newsletter – a weekly round-up of our best commentary.