As global markets reel from a new wave of U.S. tariffs, the New Zealand government is refusing to budge from its current fiscal trajectory, signaling confidence in its economic strategy despite widespread uncertainty and growing pressure on exporters.
The move comes after President Trump imposed a blanket 10% tariff on all New Zealand exports as part of a sweeping declaration to restore what he called “U.S. economic sovereignty.” Though the rate is comparatively low — with countries like China and the EU facing levies as high as 34% and 20% respectively — the impact on New Zealand’s trade-dependent economy could still be significant.
Finance Minister Nicola Willis acknowledged the gravity of the situation on Tuesday, calling it a “historically significant global economic event” that poses real risks to New Zealand’s recovery from a recent recession. However, she confirmed that the government will not revise its Budget plans or increase spending in response.
“Though unwelcome, these impacts are likely to be modest in comparison with the impact for many other countries,” Willis told reporters. “We have enough resilience to withstand it and we are in … a fortunate position relative to others that we can stick to our economic and fiscal strategy.”
Pressure on Export Sectors Mounts
New Zealand’s exporters, especially in the dairy, meat, and wine sectors, are already scrambling to assess how the tariffs will affect their bottom lines. The U.S. is New Zealand’s second-largest export market, accounting for around $9 billion in trade last year — roughly 12% of total exports.
The Meat Industry Association estimates that tariffs could increase costs 17-fold for some exporters. CEO Sirma Karapeeva called the tariffs disappointing, noting the long-standing complementary trade relationship with the U.S.
“We just got swept in with the rest of the world,” she said, adding that the move could significantly depress global meat markets.
Similarly, the dairy and wine sectors are bracing for a hit. Dairy Companies Association CEO Kimberly Crewther said the 10% tariff will come on top of already high existing duties, compounding the pressure. Winegrowers CEO Philip Gregan projected $75 million in new tariffs based on current export levels, warning that the added costs will almost certainly be passed on to consumers.
While some companies like Skellerup had preemptively shifted inventory to the U.S. in anticipation of trade volatility, others with thinner margins may find continued U.S. trade untenable.
Markets React Sharply
The economic fallout is already being felt on the domestic front. New Zealand’s stock market dropped sharply this week, with the NZX 50 falling 3.68% on Monday — wiping out $2 billion in market value and pushing year-to-date losses to nearly 10%. KiwiSaver retirement accounts have also been hit, affecting everyday savers across the country.
Despite these developments, Willis reiterated her commitment to achieving a Budget surplus by 2027/28, resisting calls for stimulus or increased spending.
“We will continue to provide responsible economic management that supports job creation, rising incomes and a more affordable cost of living for New Zealanders,” she said, while acknowledging that lower global growth will put downward pressure on tax revenue.
A Strategic Gamble
The government’s decision not to retaliate or revise its spending plans appears designed to maintain calm and project stability. Prime Minister Luxon has reaffirmed New Zealand’s commitment to a rules-based international trading system and rejected any tit-for-tat tariff measures.
“A trade war is frankly in nobody’s interests,” Luxon said, “It will slow global growth, it will hurt jobs, and it will reduce the amount of money we have in our wallets.”
Luxon also emphasised that New Zealand would work with like-minded nations to preserve open trade channels, even as protectionist policies gain traction globally.
Economists have warned that while New Zealand’s tariffs are lower than those faced by other countries, the indirect effects could be substantial. With Asia accounting for 70% of the nation’s trade, retaliatory tariffs in China and the EU could reduce overall global demand for New Zealand exports.
The Reserve Bank of New Zealand is expected to step in with rate cuts, starting with a widely anticipated 25 basis point reduction this week. Economists surveyed by Reuters expect more cuts in 2025 as monetary policy becomes the primary tool for cushioning the economy.
Looking Ahead
While Treasury has not forecast a recession, Willis admitted that growth expectations will be downgraded in the next fiscal update, with global inflation projected to be 0.5 percentage points higher than previously estimated.
“Put simply,” said Willis, “the past week’s global developments make our recovery harder.”