The sixth configuration of a problem that isn’t going away
The latest US tariff proposal is not a shock. It is a pattern. A proposed 12.5% tariff on most New Zealand goods would replace the expiring Section 122 tariff, which itself replaced earlier tariffs struck down by the Supreme Court, which themselves replaced the original IEEPA-based tariffs imposed in early 2025. The legal mechanism keeps changing. The direction does not.
New Zealand Winegrowers chief executive Philip Gregan captured the industry mood: “We’re not entirely surprised that the US is looking to find another way to impose blanket tariffs across products.” Beef and Lamb New Zealand chair Kate Acland was blunter: “We’re disappointed at the increase to 12.5 percent, but to be honest we were expecting it could have been worse.”
When your best-case reaction to a trade partner’s policy is “could have been worse,” you are not managing risk. You are absorbing it.
The numbers tell two stories at once
The US remains a significant market. It absorbed nearly $7 billion in NZ food and fibre exports in the year to June 2025. But the latest Stats NZ merchandise trade data shows the pivot is already underway. In March 2026 compared to March 2025, exports to the US fell $56 million, or 5.9%. Meanwhile, exports to China rose $213 million (11%), to Australia $289 million (38%), and to the EU $89 million (14%). Total goods exports rose $542 million to $7.9 billion.
For the full year ended March 2026, annual goods exports hit $81.0 billion, up $7.1 billion year-on-year. The US is losing share, but the overall export picture is improving. Diversification is working for the exporters who chose to pursue it.
The MFAT assessment of the initial 10% tariff period quantified this in September 2025. In the July 2025 quarter, annual exports to the US fell 3.0% while non-US exports grew 10.8%. The standout gains were the EU at 33.6% and South Korea at 21.9%. Those numbers did not happen by accident. They represent businesses that moved fast when the first tariff shock hit.
Wine is the canary, dairy is the structural problem
Not all sectors are equally exposed, but the most vulnerable are instructive. Wine exports to the US fell 20.6% in the July 2025 quarter, and MFAT flagged this as showing “stronger evidence of permanent demand shift” than meat or dairy. Wine is discretionary, easily substituted, and American consumers who switched to Californian or South American bottles are unlikely to switch back.
Dairy faces a different problem. Canadian dairy is exempt under USMCA, meaning NZ dairy now competes at a direct cost disadvantage against its closest rival in the American market. That is not a tariff that can be absorbed. It is a structural tilt in the competitive landscape.
Former National trade minister Tim Groser, speaking in June 2025, described the broader situation as “policy instability on steroids” but argued NZ’s position was “relatively stable” compared to countries facing more punitive rates. He warned, however, that pharmaceutical products are “absolutely in the sights of this administration,” pointing to the Pharmac drug purchasing model as a specific vulnerability and noting that steel and aluminium already face 50% tariffs.
The gap between what officials said publicly and privately
OIA documents reported by RNZ revealed that when the US imposed a 15% tariff rate, Trade Minister Todd McClay publicly called it “not surprising”. Internally, officials described it as an “unwelcome surprise” that was “clearly unfair.” MFAT deputy secretary Grahame Morton wrote: “This is extremely disappointing news.”
Washington-based officials concluded the single factor driving NZ’s higher rate was that NZ exported more to the US than it imported. A trade surplus treated as a grievance. The only suggested remedy was addressing the deficit through major purchases like aircraft. That is not a trade negotiation. It is a shakedown.
This matters for business planning because it confirms NZ’s tariff rate is not a function of trade policy merit. It is a function of bilateral arithmetic that NZ cannot easily change, set by an administration that has cycled through at least five different tariff regimes since January 2025.
What this actually means for exporters
The Treasury Budget Economic and Fiscal Update forecasts GDP growth of 1.2% for the year to June 2026, with CPI inflation hitting 4.2% in the June quarter. Treasury notes that kiwifruit and meat traded at record-high prices, but forestry and wine faced “more challenging conditions.” The sectors most exposed to US tariff pressure are the same ones Treasury flags as struggling.
Around 70% of NZ’s total exports already go to FTA partner countries, and the CPTPP covers 12 nations. The infrastructure for diversification exists. The question is whether individual businesses have done the work to redirect supply chains, build customer relationships, and actually utilise the preferential rates available to them.
In April 2025, former Reserve Bank economist Michael Reddell warned that if the US regime “remains fundamentally unpredictable for a very long time, there will be a sharp depression in investment” with recovery taking five to ten years. Eighteen months later, the unpredictability has not eased. It has become the new normal.
New Zealand has no bilateral FTA with the US and no realistic prospect of getting one. The exporters who are winning treated the first tariff shock as a permanent signal. Those still waiting for stability to return are planning against a world that no longer exists.
Sources
- RNZ: New Zealand’s primary sector exporters ‘not entirely surprised’ by proposed US tariffs (2025-06-05)
- Newsroom: How Trump regime’s ‘policy instability on steroids’ affects NZ (2025-06-06)
- Stats NZ: Overseas merchandise trade: March 2026 (2026-05-21)
- MFAT: US tariff 10 percent assessment April 2025 (2025-09)
- Treasury: Budget Economic and Fiscal Update 2026 (2026-05-28)
- RNZ: ‘We are now in the grips of this tariff war’ – economists warn of second-order effects (2025-04-09)
- RNZ: Inside NZ’s ‘hectic day’ after US President Donald Trump’s tariff shock
- BERL: Trade uncertainty is costly