Stephen Jacobi: The US is a riskier trade partner than China

Economy Watch

New Zealand exporters to the United States might be at greater risk of being disrupted than those exporting to China, according to one trade expert.

Despite talk about the need to diversify away from China due to geopolitical differences, it may be the United States that hits Kiwi businesses with tariffs intended to shut them out.

Stephen Jacobi, the executive director of the NZ International Business Forum, said a second Trump presidency was a “sword of Damocles hanging over the global economy”.

Speaking on the Of Interest podcast, Jacobi said the 45th president had imposed “enormous tariffs” during his first term and plans to go further if elected for a second time in November.

“This time, the big thing is the 10% tariff he keeps talking about. If a 10% tariff was imposed on New Zealand exports to the United States across the board, a lot of trade would be killed off,” he said.

As part of his election campaign, Donald Trump has proposed a 10% tariff on all imports and a 60% tariff on imports from China. This would go much further than what he did after 2016.

Earlier tariffs of between 10% and 15% were applied to a specific list of goods, which were largely targeted at China but also included various other countries.

New Zealand was subjected to a 15% tariff on steel and aluminium, for example. This was bad enough, but a blanket tariff would hit much more important exports such as beef and dairy.

Jacobi said these sectors already faced strong competition from local US producers and there was also a risk that some international competitors might be able to dodge the tariff.

For example, Australia was exempted from the steel and aluminium tariffs because it had a free trade agreement with the United States — which NZ does not have.

“Go figure. This is the country that won't give us a trade agreement,” Jacobi said.

“I spent 10 years of my life trying to argue for an FTA with the United States and thought we had it in TPP, only to see them leave when President Trump got elected”.

It was this lack of guaranteed market access that makes the United States look like a riskier bet than China, where NZ does have a free trade agreement.

“Look, it's not always easy doing business with China, let's face it. But they have opened the market to us and it has transformed our economy”.

Chinese consumers were often the only ones who wanted to buy Kiwi products at the volumes and prices businesses require, he said.

Jacobi said he was not supportive of efforts to shift trade away from China, or join the AUKUS security agreement — which was clearly directed at China.

“Well, the risk [of disruption] is greater from the United States, potentially with a change of government”.