Optionality is the export insurance most Kiwi firms still haven’t bought

Anne Applebaum, the Pulitzer-winning historian, has a blunt read on where the global economy is heading. “It’s going to take time, but I think the process of the world restructuring itself around America has begun,” she told The Detail this week. Her point is mostly about democracy, Big Tech and security. The business lesson for New Zealand is more immediate. If everyone else is hedging, exporters who aren’t are making a concentrated bet on a partner that has already shown it will change the terms overnight.

America grew in importance just as it grew less predictable

The timing has been unkind. In 2024 the US became New Zealand’s second-largest export market at $9.0 billion, 12 percent of total exports and ahead of Australia. Meat exports to the US hit $2.6 billion that year, overtaking China for the first time.

Then, on 31 July 2025, Washington lifted the tariff on New Zealand goods from 10 to 15 percent. An MFAT briefing released under the OIA, dated October 2025, warned this would widen New Zealand’s average tariff disadvantage against competitors with US free trade deals, including Australia, Canada and Chile, from 1.1 percent to 5 percent or more. That hurts even exporters whose products weren’t specifically targeted.

In 2025, trade law academic Jane Kelsey called the shock a “wake-up call” for a country running a “pretty basic export commodity model” concentrated on a handful of markets. She was right, and the alarm is still ringing.

Everyone else is already hedging

Applebaum is describing something the trade data already shows. Reuters reported in January 2026 that countries were discovering more latitude than expected to manage US risk without decoupling, with bilateral pacts accelerating and “de-risking”, once reserved for China, now applied to America.

Applebaum points to the EU-South America deal, which “wasn’t anybody’s priority before”. She urges New Zealand to work with like-minded partners such as Australia, Japan and Europe. None of this means abandoning the world’s most lucrative consumer market. It means refusing to be held hostage by it.

Optionality works, if you’re Fonterra

The trade establishment has rebranded the answer. In 2025, Felicity Roxburgh of the NZ International Business Forum told a trade policy school audience: “Optionality is fluid, it’s dynamic, it’s agile”, as opposed to diversification’s negative connotations. Fonterra’s trade strategy manager Justine Arroll framed the goal as the ability to pivot product mix between markets.

That works for a co-operative selling into 100 markets with China at 30 percent of its book. It is far harder for everyone else. KPMG director Nick Swallow said in 2025 that the businesses he advises carry US exposure of 20 to 85 percent of revenue, with some “eating the tariff” until net profit approaches zero. Optionality, he noted, comes with an opportunity cost.

That cost is real. But so is the cost of a business whose margin depends on one White House not changing its mind again.

The bill arrives on a delay

So far the macro picture looks tolerable, which is exactly why complacency is dangerous. Exports of goods and services reached $32.5 billion in the June 2026 quarter, up from $28.5 billion a year earlier, with volumes up 6.4 percent. Underneath, though, the goods terms of trade fell 9.0 percent as import prices rose 14 percent against export prices up just 3.5 percent.

The Reserve Bank’s own modelling, published in March 2026, found the US tariff shock disinflationary in the short run, with a relatively modest GDP hit. But as global supply chains become less efficient, it expected the effect to flip to inflationary pressure by around 2030. Put simply, the easy part is now. The expensive part comes later, when a fragmented trading system shows up in input costs and interest rates.

Use the insurance already paid for

New Zealand has spent three decades building a network of trade agreements: CPTPP, ASEAN, the EU, the UK, with India on the agenda. That network is not a talking point. It is a ready-made hedge most exporters have never fully priced into their strategy.

The practical steps are unglamorous. Audit revenue concentration by market, something many firms have not done since July 2025. Identify which product lines could move into FTA markets where New Zealand now holds a tariff edge over US-reliant rivals. Map critical input dependencies too. A 2025 University of Auckland commentary argued the real test is resilience, the ability to make, adapt and substitute when the system falters.

There is one caution worth heeding. Kelsey has argued, in a comment on this week’s Newsroom piece, that trade deals can lock in commitments that constrain how governments regulate Big Tech and data. Exporters should want both open markets and policy room, and should press Wellington on getting that balance right.

The broader point stands. The world is not waiting for America to settle down. Kiwi exporters shouldn’t either. Firms that build optionality on their own timetable will pay for it in management time and some margin. Those that wait will pay whatever price geopolitics sets for them.

Sources

• Newsroom: Why the world is working around the US (2026-10-23)
• RNZ: Everyone’s hedging – why the world is working around the US (2026-10-24)
• Stats NZ: US now New Zealand’s second largest export partner (2025-01-30)
• MFAT: United States Tariffs – New Zealand Response and Updated Impact Analysis (2025-10-31)
• NZ Herald: Could Trump’s tariffs force NZ to rethink its trade diversity? (2025-08-06)
• Public Policy Institute: Move over ‘diversification’ – NZ trade has a new buzzword (2025-11-28)
• Newsroom: Move over ‘diversification’ – NZ trade has a new buzzword (2025-11-21)
• Stats NZ: International trade – June 2026 quarter (2026-09-03)
• University of Auckland: Building resilience to the shocks afflicting global trade (2025-04-10)