April 7, 2025 • 20 mins
Donald Trump’s Liberation Day has felt more like a bloodbath for the world economy.
The US President last week announced what he called reciprocal tariffs on almost every country on Earth – as well as some islands uninhabited by human life.
New Zealand was not as impacted as most – with just a10 percent tariff on our goods imported into the US – but the European Union has had a 20% bump on tariffs, while China has received an additional 34% tariff.
More than 50 countries have reportedly sought talks with the US to ease tariffs, but as trillions are wiped off the stock market, what does this all mean in the short term for your wallet?
Today on The Front Page, we’re sorting through the numbers with NZ Herald business editor at large, Liam Dann.
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You can read more about this and other stories in the New Zealand Herald, online at nzherald.co.nz, or tune in to news bulletins across the NZME network.
Host: Chelsea Daniels
Sound Engineer: Richard Martin
Producer: Ethan Sills
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Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
Speaker 1 (00:05):
Hilda. I'm Chelsea Daniels and this is the Front Page,
a daily podcast presented by the New Zealand Herald. Donald
Trump's Liberation Day has felt more like a blood bath
for the world economy. The US president last week announced
what he called reciprocal tariffs on almost every country on Earth,
(00:28):
as well as some islands uninhabited by human life. New
Zealand was not as impacted as most, with just a
ten percent tariff on our goods imported into the US,
but the European Union has had a twenty percent bump
on tariffs, while China has received an additional thirty four
percent tariff. More than fifty countries have reportedly sought talks
(00:50):
with the US to ease these tariffs. But as trillions
of dollars are wiped from the US stock market, what
does this all mean for New Zealand? They on the
front Page. We're sorting through the numbers with Enzied Herald
Business Editor at Large Liam Dan. Liam. First off, can
(01:12):
you explain to those who are unaware what a tariff
actually is? Sure?
Speaker 2 (01:17):
Yeah, I mean a tariff's just an a tax really
at the border on goods coming into your country, and
it's one of the oldest forms of taxation in the
history of world or human economics. And yeah, it's paid
by the importer at the border and adds costs to
imported goods, raises money for the government, and imparts an
advantage to locally produced goods.
Speaker 1 (01:36):
And what direction does it go in, because that's one
of the confusing aspects of this, right, Trump is actually
making goods more expensive to US consumers.
Speaker 2 (01:46):
Yeah, absolutely, he argues that foreign countries will pay. I mean, technically,
you know, it's absolutely the case that the US importer pays.
They have to fill out a form and it goes
to US customs. But what I think Trump means is
that he believes the foreign countries trying to sell the
goods will bear the cost, which means that if they
(02:06):
want to get the goods, and they'll have to lower
their prices or the prices will be too high and
no one will buy them. So and that respect, it
could cost us, and it could cost other countries. If
we want to sell the same amount of wine into
the US, maybe our prices will have to come down
and will have to wear the cost. That's not clear,
you know, Like New Zealand sells a lot of Hamburger beef.
(02:27):
All our leftover the poor male dairy cows or the
ones that you know because they're male, they become hamburger beef.
They go off to the US to become hamburgers, and
the US needs that. They have a shortage of that
kind of beef, and they've been taking a lot of
New Zealand and Australian beef for basically for hamburgers. And
if they still need that, you know, they're going to
have to take it and pay the tariff, and the
(02:48):
consumers there will pay the cost. Yeah, it could be split,
but it's hard to know for sure, but yeah, there
will be there. Expecting costs to go up for US consumers.
Speaker 1 (02:57):
Trillions of dollars have been white of the value of
the US stock market in response to the tariffs already.
How rare is this market reaction?
Speaker 2 (03:08):
Well, this is pretty bad. I don't know how it's
going to go in the next few days, whether you know,
there's so much relying on what comes out of the
White House. But this is a serious, serious meltdown. This
is like, you know, brings back feelings of the GFC.
There was a big meltdown when COVID hit a really
massive sell off for a few days. But then, of
course the government came in with stimulus, and the same
(03:30):
with the GFC. Eventually the government comes in and the
Federal Reserve comes in to support things. In this case,
the government does not coming to the rescue. The US
government is the reason that this has happened. So yeah,
but it's historic. This is an historic sell off. This
is a global market meltdown. The world has changed, you know,
a little be in the history books.
Speaker 1 (03:49):
And in terms of what this mimics in years gone by.
I mean, you mentioned the GFC. During the GFC, markets
essentially crashed by more than what we're seeing at the moment.
What will indicate GFC levels within the next few days.
Speaker 2 (04:08):
Yeah, it's interesting because the GFC was a huge demand shop.
It's the fear that takes hold really that causes the problem.
The tariffs are supposed to create costs for US consumers,
which means that there's inflationary issues, which means interest rates
are likely to stay higher in the US, their dollar
would go higher. All of that stuff was predicted as
an inflationary problem, but the fear and shock when it
(04:29):
happened meant that the opposite has happened. The US dollar
has fallen in relative terms. US bond yields have fallen,
and there's a lot of fear about recession in the
US now and that is overwhelming the other bad stuff.
So there's two lots of bad stuff here. And the
demand side bad stuff is what's really we've seen in
(04:49):
the past few days. Whether that stabilizes or who could say.
But you know, if we see more retaliation the Chinese
have responded, if we see Europe respond with more tariffs,
you know, then you have to go back to the
nineteen thirties to get a comparison with what's going on.
I mean, this is sort of you know, the last
time the US did something like this was something called
(05:09):
the Smoot Hawley Act in nineteen thirty when they thought,
as a response to the big stock market crash of
twenty nine that putting tariffs on everything was going to
be a solution. And that's famously been talked about and
almost you know, universally accepted as a failure in economics,
and you know, kids are taught about it in schools.
Speaker 1 (05:28):
Well, Ferris Bueller, isn't it in that movie?
Speaker 2 (05:30):
Yeah, that's right. There's a famous scene in the first
Bueller's Day Off for those who are of a certain
age and love that movie, where the class is sitting
on their board as all hell and the teacher pretty
much explains the Smoot Hawley Act.
Speaker 3 (05:42):
In nineteen thirty, the Republican controlled House of Representatives, in
an effort to alleviate the effects of the anyone, anyone
Great Depression past the anyone anyone the tariff Bill, the
Holly Smooth Tariff Act, which anyone raised or lowered, raised
(06:06):
tariffs in an effort to collect more revenue for the
federal government. Did it work? Anyone anyone know the effects?
It did not work, and the United States sank deeper
into the Great Depression.
Speaker 2 (06:22):
US kids all over, they've all been taught this. Trump
says that's wrong. He has a different view on that,
and his advisors have a different view. They think the
problem was that the tariffs were taken off from the
first place in nineteen oh nine, I think he said,
and that the Smooth Hawley Act was too little, too late,
and they should have kept the tariffs on. So he's
HARKing back to the great days of the late nineteenth
century when US had very high tariffs and low income
(06:45):
tax what they called the Gilded Age when there was
a it was a great time for billionaires. JP Morgan
and all that sort of stuff. He's literally saying that's
what they want to get back to, those great days
of America. Yeah, there's a little bit of skepticism. That
would be an understatement. But so there is a lot
of lot of fear and panic through US markets about
(07:05):
what is actually happening.
Speaker 1 (07:06):
And what does such a loss mean at a consumer
level or is this only a concern for investors at
this stage.
Speaker 2 (07:15):
Yeah, I mean, look, we've been through crashes before. It
looks horrible when you look at your KEII saver, and
it might you know, we're going to have some volatility
and it might might get worse. You know, there's no
question that there is a risk that things could get
worse for consumers, like until you know, in New Zealand
it's we sort of buffered a little bit. Our share
market is down as well, but it's not our direct
(07:36):
The direct tariffs on New Zealand were seen as manageable
by economists. The issue for US is what happens to
Asia and China and the economies there. And I guess
to some extent the US, So it's the demand. So
are people still going to want to buy as much
of our stuff? Are they going to want to travel here?
So it's a risk for tourism. Already we've seen in
New Zealand shares fall a lot. There's a risk that
(07:57):
it does hit tourism, so that that fragile recovery tourism
is just starting to sort of add value to the
New Zealand economy again sort of since COVID and that's
at risk. We're lucky we sell food. You know, it
never goes out of fashion, but it's still you know,
when you saw the tariffs were huge on countries like
Vietnam and you know, a lot of Thai land, a
lot of Southeast Asian countries. China's going to take them
(08:20):
on a trade war. There's all sorts of side effects.
So it's too soon to say for sure exactly what
this will mean. There might be some weird upsides for
New Zealand, but overall, the hit to the global economy
is going to be felt here. So you know, if
global demand is down and global growth is down, New
Zealand's going to feel that, and that's going to make
our recovery much harder to sustain.
Speaker 1 (08:41):
And it's interesting as well. I mean, there might be
some people out there saying, look, what happens in the
US stays in the US, and we're in a good position.
But if you look back to the eighties, I noticed
that when Wall Street crashed that iconic twenty percent, I
think dead in the end, and it was the worst
crash ever recorded on Wall Street. The New Zealand Stock Exchange,
(09:02):
didn't it then not only crash twenty percent, but continue
to crash up to fifty sixty percent in the months
that followed.
Speaker 2 (09:10):
Yeah, that's true. It was a very different stock market
in New Zealand at the time. We had we were
in a stock market bubble ourselves at the time, and
we had a lot of very speculative investment companies and
so forth on the market in New Zealand. Now our
market is much more of a sort of a slightly
boring reflection of the economy. It's got some big retailers,
it's got some we've seen, you know, some companies are
(09:30):
affected by tariffs. Fisher and pikel Healthcare as one of
our biggest companies, and that's affected by tariff's But that
gets priced and it hasn't been booming, it's fair to
say our New Zealand and inziet X anyway. So yeah,
it's coming off in response. There's a bit of fear
in markets generally when things crash, but there isn't a
reason for it to just just absolutely go through the
floor in the same way as there was in the
(09:51):
nineteen eighties. A lot of it's more directly tied to
how our economy is going. So those retailers are struggling
until humors get out and spend again. So that's not
great news. If there's just just the amount of uncertainty
and that the damage it does to confidence. All of
this is not great news in that sense.
Speaker 1 (10:20):
So why is Trump doing this? What's his argument for
all of it?
Speaker 2 (10:25):
He seems to genuinely believe that this is a way
to get back to a world where US manufacturing is dominant.
So obviously, when you take the tariffs away, it's much
cheaper to build, you know, the labor is much cheaper
in Vietnam or China or whoever to build build the
cars and build the phones, and sew the clothes and
make the Nike sneakers. So the US has effectively exported
(10:45):
out a lot of manufacturing jobs. He's talking about bringing
them back, and I suppose that appeals to his base
in some of those towns and cities that have been
really hammered by the globalization process and seeing the factories
shut down. Yeah, I'm personally at skeptical. You know, a
lot of his supporters are saying, yeah, we want the
factories back, and we want this. I'm not sure that
young Americans want to be back in a factory working
(11:07):
for the kind of wages. You know, the kind of
wages that Americans would expect to get paid for factory
work are not going to mean that it's very hard
for their goods to be competitive, even with the tariffs,
because you know, just such a huge difference between America
and the places where they are making this stuff now
in America, the previous economic model had been to control
(11:27):
the IP, the intellectual property on Wall Street. It sort
of controls the financial markets of the world, you know,
and Silicon Valley is it's the tech giant of the world,
and it's kind of through all. You know, they're big companies.
They own the IP and all the money come the
dividends all come back but the yeah that the jobs
haven't been there. That's Trump's theory, I guess, is to rebuild.
(11:50):
He's talking about rebuilding US manufacturing, bringing car making back
to Detroit, all that kind of stuff.
Speaker 1 (11:56):
Well, I kind of imagine that the late eighteen hundreds
and then the boom time that we're talking about would
have been an amazing time for worker riots.
Speaker 2 (12:04):
Yeah, it wasn't was it was rough right, it was,
you know, like they didn't have all the labor laws
that came about through the years of the early twentieth century.
And that's sort of the kind of world that you're
in with some of these other probably poorer countries that
have much cheaper labor. So yeah, it's very hard to
(12:25):
see the US getting back to that. And as a plan,
it even even it looks like a fairly long term plan.
So politically, there's going to be some real issues with
you know, the idea that they tank the US economy
in the short term. Even if he's able to keep
selling or he will keep selling this longer term dream
of rebuilding manufacturing, it just would take a considerable amount
of time to do that, and you know, the political
(12:47):
cycles pretty short these days. It's going to be a
real test of Trump's popularity. Put it that way, and.
Speaker 1 (12:53):
I mean has put a tariff on the Herd and
McDonald Islands, which is only inhabited by penguins and seas
and Norfolk Island has received a twenty nine percent tariff
despite claiming to have no export relationship with the US.
These mistakes, if you can call them mistakes, don't really
instill you with too much confidence to they sure.
Speaker 2 (13:14):
I mean a look, to be fair, I've heard that
the White House has come back and said, look, they
did that because they want to make sure that in
this case Australia, which has the sort of the Australian territories,
doesn't use them as a loophole because they are separate territory.
And I don't know, like the idea that Australia would
funnel all its steal exports through you know, Norfolk Island
(13:35):
or something. It just seems a bit crazy to me.
But that's that's what the White House says was the
reason for that. The way that the tariffs are worked
out shocked a lot of people, and that's part of
what's causing some of the sort of uncertainty and chaos.
So they're called reciprocal tariffs, but they literally aren't reciprocal.
New Zealand has an average tariff on American goods of
about one point nine percent or something, and on the
(13:57):
chart that Trump had it said we had a twenty
percent tariff. They worked it out just by looking at
the trade balance with the countries and countries that had
a trade deficit with the US. So we have what
the US would call a trade deficit with them. We
sold more stuff to America than we bought last year,
so about nine billion dollars worth of goods went to America. Well,
(14:19):
that was our surplus, and so they just do the
maths on that.
Speaker 4 (14:26):
Tomorrow, the United States will implement reciprocal tariffs on other nations.
It's been a long time since we even thought of that.
We used to think about it a lot. We didn't
think about it for many decades, and you see what's
happened for nicians that treat us badly. We will calculate
the combined read of all their tariffs, non monetary barriers,
(14:48):
and other forms of shooting. And because we are being
very kind, we're kind people, very kind. You're not so
kind when you got ripped off, you my auto worker friends.
Speaker 1 (15:06):
How long could it roughly take for Trump to restart
some of the industries that he wants to restart in
the US, like manufacturing. You can't just move an entire
business to the US overnight, can you.
Speaker 2 (15:18):
Well, this is the issue. It takes time to build
the factory, even if companies move very quickly to try
and you know, like if Nike wants to repatriate at
shoe factories or something like that, that's going to take
a lot of time and shifting and changing to the
global supply chains. And it's also kind of you know,
would you you know, the Trump administration has a habit
(15:39):
of negotiating changing policy. Things can change overnight. You know,
at what point does the policy become clear and certain
enough that these companies can trust that it's worth making
these big moves. So yeah, look, probably quite a long time,
and probably a longer time than you know, this current
political cycle. So for example, you know, use has got
(16:00):
midterms next year already, there'll be a huge amount of
intense focus on the economy on Wall Street in the
coming months, and it would be hard to see how
you'd get the upside from a policy like this, even
if it worked for several years.
Speaker 1 (16:13):
What do you think New Zealand will or should do
in response to all of this. Do we just need
to stop buying American products or perhaps look at alternative
trading partners, which I know that they're already doing.
Speaker 2 (16:26):
Yeah, I think we have to stay a little calm.
We are we actually are sitting in a pretty good
spot with the tariffs themselves. You know that they're not
going to kill trade with the US, so you know,
there is a little bit of keep calm and carry on.
We certainly aren't going to try and accelerate things and
have escalate things and put on our own tariffs because
A that would be a risk of coppying more flat
(16:50):
back from the US, and B it just doesn't fit
with the way our economy works. And we sort of
a bipartisan agreement on the idea that we're a low
tariff economy, we're an open, free trading economy. And look,
the government is already very focused on you know, both
both both labor and national over the years, very focused
on finding new new trade partners. You know, you've seen
(17:12):
Christopher lux and talk a lot about India, and boy,
that's you know, that's that's got huge potential and I
really hope they can progress that. In fact, this might
help them progress that because India has got big problems
with huge tariffs going on into the US, so they
might be looking around for friends. There may be opportunities
there to expand trading partnerships like the CP TPP and
(17:32):
other other you know trading you know, multilateral trading agreements
we're in. We've got our free trade agreement with China.
Speaker 4 (17:39):
Yeah.
Speaker 2 (17:39):
Look, you know, New Zealand is quite good at this stuff.
We have really great trade officials and diplomats that do
this stuff. We've got it being quite flexible. I mean,
it's it's it's tough. It's going to be a really
tough time, but I think we are well placed to
sort of find a pathway through it.
Speaker 1 (17:56):
And looking towards the next few days or even weeks,
what should we be be looking out for when it
comes to the next global financial crisis? I mean, what
are the warning signs, what are the red flags that
will be popping up?
Speaker 2 (18:11):
Well, it's all going to play out in real time
on currency markets, equity markets, commodity markets. I would say
that the big ones for New Zealand will be we'll
start to see you the dairy auctions, the commodity prices
are going to be an issue. So if it starts
to affect global demand for commodities, that could mean less
money coming into New Zealand. But then again, you know
(18:32):
it is food, so that's that we've got that going
for US. I am concerned about what it might do
to tourism and the short term for consumers. You know,
when you look at things like oil, oil price is
absolutely crashed in the last two or three days, so
you're going to be paying less to fill up the tank.
The New Zealand dollar is actually up in relative terms
against the US dollar, and the US barrel price of
(18:54):
oil has fallen to sort of levels we haven't seen
since you know, the darkest days of COVID, So that's
you know, US sixty sixty three dollars a barrel I think,
or you know, around sixty dollars a barrel. So yeah,
some of these things are sort of deflationary, weirdly in
the first instance, or disinflationary, so you know, the economists
expect it. It should also start to create inflationary pressure
(19:14):
in other places, you know, as other countries put up Tariff's,
you know, So you've got basically two forces pushing against
each other, these deflationary forces, you know, the demand side,
which is the shock that you know, consumers might stop
spending because of all the uncertainty, and that's dominating at
the moment. And then you've got the inflationary side, the
supply side, which is what we know that Tariff's kind
(19:35):
of do in the long run, which is pushed costs up.
So you know, these two competing forces is say, both
not great things, and at the moment it's it's the
sort of recessionary demand side stuff that's dominating.
Speaker 1 (19:47):
Thanks for joining us, Liam, great, no, happy to be here.
That's it for this episode of The Front Page. You
can read more about today's stories and extensive new coverage
at enzdherld dot co dot nz. The Front Page is
produced by Ethan Sills and Richard Martin, who is also
(20:08):
a sound engineer. I'm Chelsea Daniels. Subscribe to the Front
Page on iHeartRadio or wherever you get your podcasts, and
tune in tomorrow for another look behind the headlines.
Hilda. I'm Chelsea Daniels and this is the Front Page,
a daily podcast presented by the New Zealand Herald. Donald
Trump's Liberation Day has felt more like a blood bath
for the world economy. The US president last week announced
what he called reciprocal tariffs on almost every country on Earth,
(00:28):
as well as some islands uninhabited by human life. New
Zealand was not as impacted as most, with just a
ten percent tariff on our goods imported into the US,
but the European Union has had a twenty percent bump
on tariffs, while China has received an additional thirty four
percent tariff. More than fifty countries have reportedly sought talks
(00:50):
with the US to ease these tariffs. But as trillions
of dollars are wiped from the US stock market, what
does this all mean for New Zealand? They on the
front Page. We're sorting through the numbers with Enzied Herald
Business Editor at Large Liam Dan. Liam. First off, can
(01:12):
you explain to those who are unaware what a tariff
actually is? Sure?
Speaker 2 (01:17):
Yeah, I mean a tariff's just an a tax really
at the border on goods coming into your country, and
it's one of the oldest forms of taxation in the
history of world or human economics. And yeah, it's paid
by the importer at the border and adds costs to
imported goods, raises money for the government, and imparts an
advantage to locally produced goods.
Speaker 1 (01:36):
And what direction does it go in, because that's one
of the confusing aspects of this, right, Trump is actually
making goods more expensive to US consumers.
Speaker 2 (01:46):
Yeah, absolutely, he argues that foreign countries will pay. I mean, technically,
you know, it's absolutely the case that the US importer pays.
They have to fill out a form and it goes
to US customs. But what I think Trump means is
that he believes the foreign countries trying to sell the
goods will bear the cost, which means that if they
(02:06):
want to get the goods, and they'll have to lower
their prices or the prices will be too high and
no one will buy them. So and that respect, it
could cost us, and it could cost other countries. If
we want to sell the same amount of wine into
the US, maybe our prices will have to come down
and will have to wear the cost. That's not clear,
you know, Like New Zealand sells a lot of Hamburger beef.
(02:27):
All our leftover the poor male dairy cows or the
ones that you know because they're male, they become hamburger beef.
They go off to the US to become hamburgers, and
the US needs that. They have a shortage of that
kind of beef, and they've been taking a lot of
New Zealand and Australian beef for basically for hamburgers. And
if they still need that, you know, they're going to
have to take it and pay the tariff, and the
(02:48):
consumers there will pay the cost. Yeah, it could be split,
but it's hard to know for sure, but yeah, there
will be there. Expecting costs to go up for US consumers.
Speaker 1 (02:57):
Trillions of dollars have been white of the value of
the US stock market in response to the tariffs already.
How rare is this market reaction?
Speaker 2 (03:08):
Well, this is pretty bad. I don't know how it's
going to go in the next few days, whether you know,
there's so much relying on what comes out of the
White House. But this is a serious, serious meltdown. This
is like, you know, brings back feelings of the GFC.
There was a big meltdown when COVID hit a really
massive sell off for a few days. But then, of
course the government came in with stimulus, and the same
(03:30):
with the GFC. Eventually the government comes in and the
Federal Reserve comes in to support things. In this case,
the government does not coming to the rescue. The US
government is the reason that this has happened. So yeah,
but it's historic. This is an historic sell off. This
is a global market meltdown. The world has changed, you know,
a little be in the history books.
Speaker 1 (03:49):
And in terms of what this mimics in years gone by.
I mean, you mentioned the GFC. During the GFC, markets
essentially crashed by more than what we're seeing at the moment.
What will indicate GFC levels within the next few days.
Speaker 2 (04:08):
Yeah, it's interesting because the GFC was a huge demand shop.
It's the fear that takes hold really that causes the problem.
The tariffs are supposed to create costs for US consumers,
which means that there's inflationary issues, which means interest rates
are likely to stay higher in the US, their dollar
would go higher. All of that stuff was predicted as
an inflationary problem, but the fear and shock when it
(04:29):
happened meant that the opposite has happened. The US dollar
has fallen in relative terms. US bond yields have fallen,
and there's a lot of fear about recession in the
US now and that is overwhelming the other bad stuff.
So there's two lots of bad stuff here. And the
demand side bad stuff is what's really we've seen in
(04:49):
the past few days. Whether that stabilizes or who could say.
But you know, if we see more retaliation the Chinese
have responded, if we see Europe respond with more tariffs,
you know, then you have to go back to the
nineteen thirties to get a comparison with what's going on.
I mean, this is sort of you know, the last
time the US did something like this was something called
(05:09):
the Smoot Hawley Act in nineteen thirty when they thought,
as a response to the big stock market crash of
twenty nine that putting tariffs on everything was going to
be a solution. And that's famously been talked about and
almost you know, universally accepted as a failure in economics,
and you know, kids are taught about it in schools.
Speaker 1 (05:28):
Well, Ferris Bueller, isn't it in that movie?
Speaker 2 (05:30):
Yeah, that's right. There's a famous scene in the first
Bueller's Day Off for those who are of a certain
age and love that movie, where the class is sitting
on their board as all hell and the teacher pretty
much explains the Smoot Hawley Act.
Speaker 3 (05:42):
In nineteen thirty, the Republican controlled House of Representatives, in
an effort to alleviate the effects of the anyone, anyone
Great Depression past the anyone anyone the tariff Bill, the
Holly Smooth Tariff Act, which anyone raised or lowered, raised
(06:06):
tariffs in an effort to collect more revenue for the
federal government. Did it work? Anyone anyone know the effects?
It did not work, and the United States sank deeper
into the Great Depression.
Speaker 2 (06:22):
US kids all over, they've all been taught this. Trump
says that's wrong. He has a different view on that,
and his advisors have a different view. They think the
problem was that the tariffs were taken off from the
first place in nineteen oh nine, I think he said,
and that the Smooth Hawley Act was too little, too late,
and they should have kept the tariffs on. So he's
HARKing back to the great days of the late nineteenth
century when US had very high tariffs and low income
(06:45):
tax what they called the Gilded Age when there was
a it was a great time for billionaires. JP Morgan
and all that sort of stuff. He's literally saying that's
what they want to get back to, those great days
of America. Yeah, there's a little bit of skepticism. That
would be an understatement. But so there is a lot
of lot of fear and panic through US markets about
(07:05):
what is actually happening.
Speaker 1 (07:06):
And what does such a loss mean at a consumer
level or is this only a concern for investors at
this stage.
Speaker 2 (07:15):
Yeah, I mean, look, we've been through crashes before. It
looks horrible when you look at your KEII saver, and
it might you know, we're going to have some volatility
and it might might get worse. You know, there's no
question that there is a risk that things could get
worse for consumers, like until you know, in New Zealand
it's we sort of buffered a little bit. Our share
market is down as well, but it's not our direct
(07:36):
The direct tariffs on New Zealand were seen as manageable
by economists. The issue for US is what happens to
Asia and China and the economies there. And I guess
to some extent the US, So it's the demand. So
are people still going to want to buy as much
of our stuff? Are they going to want to travel here?
So it's a risk for tourism. Already we've seen in
New Zealand shares fall a lot. There's a risk that
(07:57):
it does hit tourism, so that that fragile recovery tourism
is just starting to sort of add value to the
New Zealand economy again sort of since COVID and that's
at risk. We're lucky we sell food. You know, it
never goes out of fashion, but it's still you know,
when you saw the tariffs were huge on countries like
Vietnam and you know, a lot of Thai land, a
lot of Southeast Asian countries. China's going to take them
(08:20):
on a trade war. There's all sorts of side effects.
So it's too soon to say for sure exactly what
this will mean. There might be some weird upsides for
New Zealand, but overall, the hit to the global economy
is going to be felt here. So you know, if
global demand is down and global growth is down, New
Zealand's going to feel that, and that's going to make
our recovery much harder to sustain.
Speaker 1 (08:41):
And it's interesting as well. I mean, there might be
some people out there saying, look, what happens in the
US stays in the US, and we're in a good position.
But if you look back to the eighties, I noticed
that when Wall Street crashed that iconic twenty percent, I
think dead in the end, and it was the worst
crash ever recorded on Wall Street. The New Zealand Stock Exchange,
(09:02):
didn't it then not only crash twenty percent, but continue
to crash up to fifty sixty percent in the months
that followed.
Speaker 2 (09:10):
Yeah, that's true. It was a very different stock market
in New Zealand at the time. We had we were
in a stock market bubble ourselves at the time, and
we had a lot of very speculative investment companies and
so forth on the market in New Zealand. Now our
market is much more of a sort of a slightly
boring reflection of the economy. It's got some big retailers,
it's got some we've seen, you know, some companies are
(09:30):
affected by tariffs. Fisher and pikel Healthcare as one of
our biggest companies, and that's affected by tariff's But that
gets priced and it hasn't been booming, it's fair to
say our New Zealand and inziet X anyway. So yeah,
it's coming off in response. There's a bit of fear
in markets generally when things crash, but there isn't a
reason for it to just just absolutely go through the
floor in the same way as there was in the
(09:51):
nineteen eighties. A lot of it's more directly tied to
how our economy is going. So those retailers are struggling
until humors get out and spend again. So that's not
great news. If there's just just the amount of uncertainty
and that the damage it does to confidence. All of
this is not great news in that sense.
Speaker 1 (10:20):
So why is Trump doing this? What's his argument for
all of it?
Speaker 2 (10:25):
He seems to genuinely believe that this is a way
to get back to a world where US manufacturing is dominant.
So obviously, when you take the tariffs away, it's much
cheaper to build, you know, the labor is much cheaper
in Vietnam or China or whoever to build build the
cars and build the phones, and sew the clothes and
make the Nike sneakers. So the US has effectively exported
(10:45):
out a lot of manufacturing jobs. He's talking about bringing
them back, and I suppose that appeals to his base
in some of those towns and cities that have been
really hammered by the globalization process and seeing the factories
shut down. Yeah, I'm personally at skeptical. You know, a
lot of his supporters are saying, yeah, we want the
factories back, and we want this. I'm not sure that
young Americans want to be back in a factory working
(11:07):
for the kind of wages. You know, the kind of
wages that Americans would expect to get paid for factory
work are not going to mean that it's very hard
for their goods to be competitive, even with the tariffs,
because you know, just such a huge difference between America
and the places where they are making this stuff now
in America, the previous economic model had been to control
(11:27):
the IP, the intellectual property on Wall Street. It sort
of controls the financial markets of the world, you know,
and Silicon Valley is it's the tech giant of the world,
and it's kind of through all. You know, they're big companies.
They own the IP and all the money come the
dividends all come back but the yeah that the jobs
haven't been there. That's Trump's theory, I guess, is to rebuild.
(11:50):
He's talking about rebuilding US manufacturing, bringing car making back
to Detroit, all that kind of stuff.
Speaker 1 (11:56):
Well, I kind of imagine that the late eighteen hundreds
and then the boom time that we're talking about would
have been an amazing time for worker riots.
Speaker 2 (12:04):
Yeah, it wasn't was it was rough right, it was,
you know, like they didn't have all the labor laws
that came about through the years of the early twentieth century.
And that's sort of the kind of world that you're
in with some of these other probably poorer countries that
have much cheaper labor. So yeah, it's very hard to
(12:25):
see the US getting back to that. And as a plan,
it even even it looks like a fairly long term plan.
So politically, there's going to be some real issues with
you know, the idea that they tank the US economy
in the short term. Even if he's able to keep
selling or he will keep selling this longer term dream
of rebuilding manufacturing, it just would take a considerable amount
of time to do that, and you know, the political
(12:47):
cycles pretty short these days. It's going to be a
real test of Trump's popularity. Put it that way, and.
Speaker 1 (12:53):
I mean has put a tariff on the Herd and
McDonald Islands, which is only inhabited by penguins and seas
and Norfolk Island has received a twenty nine percent tariff
despite claiming to have no export relationship with the US.
These mistakes, if you can call them mistakes, don't really
instill you with too much confidence to they sure.
Speaker 2 (13:14):
I mean a look, to be fair, I've heard that
the White House has come back and said, look, they
did that because they want to make sure that in
this case Australia, which has the sort of the Australian territories,
doesn't use them as a loophole because they are separate territory.
And I don't know, like the idea that Australia would
funnel all its steal exports through you know, Norfolk Island
(13:35):
or something. It just seems a bit crazy to me.
But that's that's what the White House says was the
reason for that. The way that the tariffs are worked
out shocked a lot of people, and that's part of
what's causing some of the sort of uncertainty and chaos.
So they're called reciprocal tariffs, but they literally aren't reciprocal.
New Zealand has an average tariff on American goods of
about one point nine percent or something, and on the
(13:57):
chart that Trump had it said we had a twenty
percent tariff. They worked it out just by looking at
the trade balance with the countries and countries that had
a trade deficit with the US. So we have what
the US would call a trade deficit with them. We
sold more stuff to America than we bought last year,
so about nine billion dollars worth of goods went to America. Well,
(14:19):
that was our surplus, and so they just do the
maths on that.
Speaker 4 (14:26):
Tomorrow, the United States will implement reciprocal tariffs on other nations.
It's been a long time since we even thought of that.
We used to think about it a lot. We didn't
think about it for many decades, and you see what's
happened for nicians that treat us badly. We will calculate
the combined read of all their tariffs, non monetary barriers,
(14:48):
and other forms of shooting. And because we are being
very kind, we're kind people, very kind. You're not so
kind when you got ripped off, you my auto worker friends.
Speaker 1 (15:06):
How long could it roughly take for Trump to restart
some of the industries that he wants to restart in
the US, like manufacturing. You can't just move an entire
business to the US overnight, can you.
Speaker 2 (15:18):
Well, this is the issue. It takes time to build
the factory, even if companies move very quickly to try
and you know, like if Nike wants to repatriate at
shoe factories or something like that, that's going to take
a lot of time and shifting and changing to the
global supply chains. And it's also kind of you know,
would you you know, the Trump administration has a habit
(15:39):
of negotiating changing policy. Things can change overnight. You know,
at what point does the policy become clear and certain
enough that these companies can trust that it's worth making
these big moves. So yeah, look, probably quite a long time,
and probably a longer time than you know, this current
political cycle. So for example, you know, use has got
(16:00):
midterms next year already, there'll be a huge amount of
intense focus on the economy on Wall Street in the
coming months, and it would be hard to see how
you'd get the upside from a policy like this, even
if it worked for several years.
Speaker 1 (16:13):
What do you think New Zealand will or should do
in response to all of this. Do we just need
to stop buying American products or perhaps look at alternative
trading partners, which I know that they're already doing.
Speaker 2 (16:26):
Yeah, I think we have to stay a little calm.
We are we actually are sitting in a pretty good
spot with the tariffs themselves. You know that they're not
going to kill trade with the US, so you know,
there is a little bit of keep calm and carry on.
We certainly aren't going to try and accelerate things and
have escalate things and put on our own tariffs because
A that would be a risk of coppying more flat
(16:50):
back from the US, and B it just doesn't fit
with the way our economy works. And we sort of
a bipartisan agreement on the idea that we're a low
tariff economy, we're an open, free trading economy. And look,
the government is already very focused on you know, both
both both labor and national over the years, very focused
on finding new new trade partners. You know, you've seen
(17:12):
Christopher lux and talk a lot about India, and boy,
that's you know, that's that's got huge potential and I
really hope they can progress that. In fact, this might
help them progress that because India has got big problems
with huge tariffs going on into the US, so they
might be looking around for friends. There may be opportunities
there to expand trading partnerships like the CP TPP and
(17:32):
other other you know trading you know, multilateral trading agreements
we're in. We've got our free trade agreement with China.
Speaker 4 (17:39):
Yeah.
Speaker 2 (17:39):
Look, you know, New Zealand is quite good at this stuff.
We have really great trade officials and diplomats that do
this stuff. We've got it being quite flexible. I mean,
it's it's it's tough. It's going to be a really
tough time, but I think we are well placed to
sort of find a pathway through it.
Speaker 1 (17:56):
And looking towards the next few days or even weeks,
what should we be be looking out for when it
comes to the next global financial crisis? I mean, what
are the warning signs, what are the red flags that
will be popping up?
Speaker 2 (18:11):
Well, it's all going to play out in real time
on currency markets, equity markets, commodity markets. I would say
that the big ones for New Zealand will be we'll
start to see you the dairy auctions, the commodity prices
are going to be an issue. So if it starts
to affect global demand for commodities, that could mean less
money coming into New Zealand. But then again, you know
(18:32):
it is food, so that's that we've got that going
for US. I am concerned about what it might do
to tourism and the short term for consumers. You know,
when you look at things like oil, oil price is
absolutely crashed in the last two or three days, so
you're going to be paying less to fill up the tank.
The New Zealand dollar is actually up in relative terms
against the US dollar, and the US barrel price of
(18:54):
oil has fallen to sort of levels we haven't seen
since you know, the darkest days of COVID, So that's
you know, US sixty sixty three dollars a barrel I think,
or you know, around sixty dollars a barrel. So yeah,
some of these things are sort of deflationary, weirdly in
the first instance, or disinflationary, so you know, the economists
expect it. It should also start to create inflationary pressure
(19:14):
in other places, you know, as other countries put up Tariff's,
you know, So you've got basically two forces pushing against
each other, these deflationary forces, you know, the demand side,
which is the shock that you know, consumers might stop
spending because of all the uncertainty, and that's dominating at
the moment. And then you've got the inflationary side, the
supply side, which is what we know that Tariff's kind
(19:35):
of do in the long run, which is pushed costs up.
So you know, these two competing forces is say, both
not great things, and at the moment it's it's the
sort of recessionary demand side stuff that's dominating.
Speaker 1 (19:47):
Thanks for joining us, Liam, great, no, happy to be here.
That's it for this episode of The Front Page. You
can read more about today's stories and extensive new coverage
at enzdherld dot co dot nz. The Front Page is
produced by Ethan Sills and Richard Martin, who is also
(20:08):
a sound engineer. I'm Chelsea Daniels. Subscribe to the Front
Page on iHeartRadio or wherever you get your podcasts, and
tune in tomorrow for another look behind the headlines.
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