April 5, 2025 • 10 mins
On the Republican Party's 'Liberation Day', President Donald Trump announced sweeping tariffs internationally.
New Zealand was caught in the crossfire with a 10% tariff, but we got off easy compared to other countries. But how is it impacting our global relationships?
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Speaker 1 (00:05):
You're listening to the Weekend Collective podcast from news Talk
said be.
Speaker 2 (00:10):
On the Republican Party's Liberation Day, President Donald Trump announced,
as we know, announced sweeping tariff's internationally. New Zealand was
caught in the crossfire with a ten percent tariff hit.
But you might argue we got off easily compared to
other countries. And we've also seen massive amounts of value
wiped off and I think it's the largest two day
drop in the history of the US stock exchange. The
(00:31):
States have since hit back. The States have since been
hit back with tariffs from Canada, China and the likes.
And how is it going to impact our lobal relationships
in the whole shebang anyway. Chief economist at Simplicity Shammobil
jakeb is with us. Good afternoon, Good afternoon, So just
(00:53):
quickly for those who haven't caught up with it, there
are some strange calculations that the White House has done
when it came to calculating who was going to get
hit with these tariffs. What have they done strangely.
Speaker 3 (01:05):
Well, it was quite bizarre. They essentially said, any country
that has a trade deficit that can be resolved with
tariffs now that's not really how tariffs work. Usually what
you have is somebody will impose a tax on a
particular type of product from a particular type of country.
But the Americans or their White House in this instance,
has taken the view that if you have a trade deficit,
(01:27):
it must be because you have tariffs. Now, New Zealand
does not impose tariffs on American products.
Speaker 2 (01:33):
And also it seems like he's used he's used trade
deficits in some examples. No, I think I saw something
in the GA all of it. It's all of it,
and it's all of it. So instead of looking at tariffs,
he's just looked at, for instance, I think China the
goods trade deficit. He's simply he's taken half of what
it is and come up down from sixty seven percent
to thirty four percent.
Speaker 3 (01:54):
So very much. And yeah, it's just a really bizarre thing,
like it just makes no kind of sense. And they've
also taken just one year's deficit. Now, trade deficits move
around massively from year to year. But I guess what
it shows is there isn't a whole heap of thought
around how this policy has been put forward. It's very
ideological it's very strongly viewed within the White House that
(02:15):
trade deficits are bad and tarifs will solve it. And
that's the thing that's created so much uncertainty. I don't
think financial markets expected that it would be so blunt
and so crude and so poorly thought out.
Speaker 2 (02:27):
I guess that's why we've seen such a massive amount
of value wiped off US stocks.
Speaker 3 (02:32):
Oh, it's been frightening. I mean, I was an economist
at Golm and Sachs when the Global Financial crisis happened,
and that was bad, but this was worse?
Speaker 2 (02:40):
How much worse?
Speaker 3 (02:43):
Well, it's been deeper and faster than when that happened.
And during the Global Financial crisis we were grappling with
this uncertainty of well, what's going on? We didn't know.
In this instance, it's entirely self inflicted. It's essentially the biggest,
richest country in the world saying we're going to shoot
ourselves in the foot. You just watch us.
Speaker 2 (03:01):
So what does history teach us about what what happens
as a result of these tarifts? But also are there
lessons that can be learned by world leaders in the
best way to respond?
Speaker 3 (03:12):
Absolutely so, if you look at where the tariffs are today.
They're quite similar to where they were in the early
nineteen hundreds, So this is really a century ago. None
of us really have a lived experience of what that
looks like. So the last time we had tariffs this big,
it was in the middle of that very difficult period
of World War One. What have followed was the Great Depression,
(03:32):
And unless you rewrite history, we know that tariff's played
a really big part in why that period of economic
activity was so slow and why there was so much
poverty that was created through that period. So that's the
kind of lesson, right, But what we learned from that
period as well is that if we work together and
create blocks where we can work together, where we can
reduce some of those trade barriers, then we can lift
(03:55):
each other up. And that was really the lesson that
carried through after the Second World War led by the US.
Speaker 2 (04:02):
Does that mean that if we we being everyone else
apart from the US, I guess the US and China
and everyone to play work with each other, can the
impact of those tariffs be ameliorated or improved or lessened.
Speaker 3 (04:17):
Absolutely? I think we can moderate them. It can't be
fully wished away because America is such a big consumer,
it's such a big country that it does have a
really big role to play in the demand for traded
goods around the world. So we have to assume that
there will be an effect on global trade and on
global demand because the richest consumers are going to be
hit with an extra tax, and it's not really clear
(04:40):
that we can avoid the fallout from that. But we
know that when we work together. New Zeon's already benefited
massively from our free trade agreements over recent decades. These
countries really do believe in free trade, they believe in
the rule of law, and they believe in loyalty to
each other. I think this is a really good opportunity
for us to really strengthen those ties, and New Zealand
(05:03):
can actually get some really good deals in this environment
because we are trusted as good, responsible global players.
Speaker 2 (05:10):
Do you think ten percent of that we can count
ourselves lucky. We've got off lightly, absolutely, I mean relatively speaking.
I think we're so small in the scheme of things
we were not even considered, and what that means is
that there is no kind of big immediate risk to
our exporters, which is really great. But we do know
that even at ten percent, the effect on the US
(05:31):
consumers is that there will be facing high prices and
they're probably going to be consuming this, So our exporters
still have to be prepared, but we are in a
much better position than many of our peers. Does it
mean that we might also as New Zealand consumers get
access to better price goods because well, frankly, if the
US is put tariffing them, then they might have to
divert them to China for instance, might do better deals
(05:55):
for us.
Speaker 3 (05:56):
Absolutely, I think if these tariffs do persist, what's likely
to happen is the world will be flooded with cheap
manufactured goods because there will be excess capacity around the
global market. And that means we at least for a
short period of time, we're likely to experience falling prices
or cheaper prices. But it might have the unfortunate effect
(06:18):
of killing off manufacturing in some parts of the world
because they're selling too cheaply just to sell volume. So
it's a very uncertain time and I think we should
be thinking really hard about if this price are going
to fall, what do we want to do in New
Zealand to take advantage of it.
Speaker 2 (06:37):
Excuse mate, which world leader do you think leaders have
responded the best so far? So we've seen the rhetoric
from Ursula vonder lyon for the EU talking about reciprocating
the tariffs. We're seeing China has matched tariff for tariff,
Mark Carney's talking tough in Canada. Then we've got people
like NETT and Yahoo who are going to go and
(06:57):
try and have a chat with Trump and get him
to talk them off the ledge. What do you make
of the response we've seen from world leaders?
Speaker 3 (07:04):
Well, the reason I think why I've seen such a
variety of responses nobody can predict what Trump will respond
to or what alternative we can put together, and my
sense is that we have to try and do both.
We absolutely have to talk to the US counterparts because
diplomacy has always been our first port of call and
we should try to use that channel. But realistically, nuziand
(07:26):
are so small we may not get a good look
in anytime soon. But if I look at the responses
from Canada, from the UK, from Europe, I'd say the
UK is probably going the way that we are going,
which is fairly softly softly but thinking very hard about
how do we create those wider opportunities in the future,
because we'd like to have our cake and eat it too.
Speaker 2 (07:47):
Just looking outside of our own interests, one of the
things that stood out to me was the tariffs that
are being applied to the poorer Southeast Asian countries. I
mean Cambodia forty nine percent on Cambodia, forty six percent
for Vietnam, forty eight percent for Laos. These are very
poor countries already. This is going to absolutely hammer them.
(08:10):
What does that mean for the glible economies and instability?
Speaker 3 (08:15):
Look, I'm really concerned. The world has made great progress
in reducing poverty within between countries over the course of the
last eight years, but this is likely to be quite seismic,
probably like what we saw during the Asian financial crisis
when the Asian tigers were hit really, really hard. These
tariffs are really big, and if they're implemented, many of
those countries that had been industrializing really fast lifting their
(08:38):
people out of poverty are going to slip back into it.
And it's also going to affect us, not just in
from a global citizen perspective, but also from a trading
perspective because we've benefited from the rise of these countries
like Vietnam, Cambodia across Asia. New Zealand has really benefited
from the rise of economic activity there. So we are
going to see this I think this ethical moral kind
(08:59):
of quandary of how can we help this people? And
the other part, which is the very direct selfish thing,
I think our exports will be hit.
Speaker 2 (09:08):
I mean, it's fun to make predictions, just as they
say here God laughing, is to make an undertaking that promise.
But where we're at now with what's been announced, how
long do you think this is going to be the
status quo for some time? Or is it we just
going to see constantly shifting sands as Trump tries to
manage the fallout because he hates the stock market going down.
Speaker 3 (09:27):
Well, I think Trump has proven to be very unpredictable,
and that's the uncertainty that we're all dealing with. We
just don't know if these policies will be implemented in
their current form as they've been announced, and how long
there will last. There is the hopeful person inside of
me thinks that by the midterms he's going to have
to relent because the cost on Americans is just going
(09:49):
to be too great. But the other side of me goes,
the pessimist side goes. But if he actually wants, if
he really truly believes that tariffs are the answer, then
he has to push through and that experiment can only
end in one way, which is a global recession.
Speaker 2 (10:03):
Actually, I did promise it was the last question I
got more. How flexible can we be with our trade
relationships to further mitigate the effects of it.
Speaker 3 (10:12):
We can be relatively flexible. We don't have a huge
amount of offer other than to provide leadership and that
trusted partner stentus and I think that counts for a lot,
because in a world that has become uncertain and untrusted,
being a trusted partner that believes in the rule of
law and that believes in free trade, I think we'll
count for a lot. So New Zealand actually stands in
(10:32):
a really strong position in this period of time and
I think we need to really move forward. And our
officials at MFAD are absolutely excellent. They have deep relationships
around the world. We probably are in a better position
than many other countries.
Speaker 2 (10:45):
Excellent, I have some of BEE will really appreciate your
time this afternoon.
Speaker 1 (10:48):
For more from the Weekend Collective, listen live to news
Talks be weekends from three pm, or follow the podcast
on iHeartRadio
You're listening to the Weekend Collective podcast from news Talk
said be.
Speaker 2 (00:10):
On the Republican Party's Liberation Day, President Donald Trump announced,
as we know, announced sweeping tariff's internationally. New Zealand was
caught in the crossfire with a ten percent tariff hit.
But you might argue we got off easily compared to
other countries. And we've also seen massive amounts of value
wiped off and I think it's the largest two day
drop in the history of the US stock exchange. The
(00:31):
States have since hit back. The States have since been
hit back with tariffs from Canada, China and the likes.
And how is it going to impact our lobal relationships
in the whole shebang anyway. Chief economist at Simplicity Shammobil
jakeb is with us. Good afternoon, Good afternoon, So just
(00:53):
quickly for those who haven't caught up with it, there
are some strange calculations that the White House has done
when it came to calculating who was going to get
hit with these tariffs. What have they done strangely.
Speaker 3 (01:05):
Well, it was quite bizarre. They essentially said, any country
that has a trade deficit that can be resolved with
tariffs now that's not really how tariffs work. Usually what
you have is somebody will impose a tax on a
particular type of product from a particular type of country.
But the Americans or their White House in this instance,
has taken the view that if you have a trade deficit,
(01:27):
it must be because you have tariffs. Now, New Zealand
does not impose tariffs on American products.
Speaker 2 (01:33):
And also it seems like he's used he's used trade
deficits in some examples. No, I think I saw something
in the GA all of it. It's all of it,
and it's all of it. So instead of looking at tariffs,
he's just looked at, for instance, I think China the
goods trade deficit. He's simply he's taken half of what
it is and come up down from sixty seven percent
to thirty four percent.
Speaker 3 (01:54):
So very much. And yeah, it's just a really bizarre thing,
like it just makes no kind of sense. And they've
also taken just one year's deficit. Now, trade deficits move
around massively from year to year. But I guess what
it shows is there isn't a whole heap of thought
around how this policy has been put forward. It's very
ideological it's very strongly viewed within the White House that
(02:15):
trade deficits are bad and tarifs will solve it. And
that's the thing that's created so much uncertainty. I don't
think financial markets expected that it would be so blunt
and so crude and so poorly thought out.
Speaker 2 (02:27):
I guess that's why we've seen such a massive amount
of value wiped off US stocks.
Speaker 3 (02:32):
Oh, it's been frightening. I mean, I was an economist
at Golm and Sachs when the Global Financial crisis happened,
and that was bad, but this was worse?
Speaker 2 (02:40):
How much worse?
Speaker 3 (02:43):
Well, it's been deeper and faster than when that happened.
And during the Global Financial crisis we were grappling with
this uncertainty of well, what's going on? We didn't know.
In this instance, it's entirely self inflicted. It's essentially the biggest,
richest country in the world saying we're going to shoot
ourselves in the foot. You just watch us.
Speaker 2 (03:01):
So what does history teach us about what what happens
as a result of these tarifts? But also are there
lessons that can be learned by world leaders in the
best way to respond?
Speaker 3 (03:12):
Absolutely so, if you look at where the tariffs are today.
They're quite similar to where they were in the early
nineteen hundreds, So this is really a century ago. None
of us really have a lived experience of what that
looks like. So the last time we had tariffs this big,
it was in the middle of that very difficult period
of World War One. What have followed was the Great Depression,
(03:32):
And unless you rewrite history, we know that tariff's played
a really big part in why that period of economic
activity was so slow and why there was so much
poverty that was created through that period. So that's the
kind of lesson, right, But what we learned from that
period as well is that if we work together and
create blocks where we can work together, where we can
reduce some of those trade barriers, then we can lift
(03:55):
each other up. And that was really the lesson that
carried through after the Second World War led by the US.
Speaker 2 (04:02):
Does that mean that if we we being everyone else
apart from the US, I guess the US and China
and everyone to play work with each other, can the
impact of those tariffs be ameliorated or improved or lessened.
Speaker 3 (04:17):
Absolutely? I think we can moderate them. It can't be
fully wished away because America is such a big consumer,
it's such a big country that it does have a
really big role to play in the demand for traded
goods around the world. So we have to assume that
there will be an effect on global trade and on
global demand because the richest consumers are going to be
hit with an extra tax, and it's not really clear
(04:40):
that we can avoid the fallout from that. But we
know that when we work together. New Zeon's already benefited
massively from our free trade agreements over recent decades. These
countries really do believe in free trade, they believe in
the rule of law, and they believe in loyalty to
each other. I think this is a really good opportunity
for us to really strengthen those ties, and New Zealand
(05:03):
can actually get some really good deals in this environment
because we are trusted as good, responsible global players.
Speaker 2 (05:10):
Do you think ten percent of that we can count
ourselves lucky. We've got off lightly, absolutely, I mean relatively speaking.
I think we're so small in the scheme of things
we were not even considered, and what that means is
that there is no kind of big immediate risk to
our exporters, which is really great. But we do know
that even at ten percent, the effect on the US
(05:31):
consumers is that there will be facing high prices and
they're probably going to be consuming this, So our exporters
still have to be prepared, but we are in a
much better position than many of our peers. Does it
mean that we might also as New Zealand consumers get
access to better price goods because well, frankly, if the
US is put tariffing them, then they might have to
divert them to China for instance, might do better deals
(05:55):
for us.
Speaker 3 (05:56):
Absolutely, I think if these tariffs do persist, what's likely
to happen is the world will be flooded with cheap
manufactured goods because there will be excess capacity around the
global market. And that means we at least for a
short period of time, we're likely to experience falling prices
or cheaper prices. But it might have the unfortunate effect
(06:18):
of killing off manufacturing in some parts of the world
because they're selling too cheaply just to sell volume. So
it's a very uncertain time and I think we should
be thinking really hard about if this price are going
to fall, what do we want to do in New
Zealand to take advantage of it.
Speaker 2 (06:37):
Excuse mate, which world leader do you think leaders have
responded the best so far? So we've seen the rhetoric
from Ursula vonder lyon for the EU talking about reciprocating
the tariffs. We're seeing China has matched tariff for tariff,
Mark Carney's talking tough in Canada. Then we've got people
like NETT and Yahoo who are going to go and
(06:57):
try and have a chat with Trump and get him
to talk them off the ledge. What do you make
of the response we've seen from world leaders?
Speaker 3 (07:04):
Well, the reason I think why I've seen such a
variety of responses nobody can predict what Trump will respond
to or what alternative we can put together, and my
sense is that we have to try and do both.
We absolutely have to talk to the US counterparts because
diplomacy has always been our first port of call and
we should try to use that channel. But realistically, nuziand
(07:26):
are so small we may not get a good look
in anytime soon. But if I look at the responses
from Canada, from the UK, from Europe, I'd say the
UK is probably going the way that we are going,
which is fairly softly softly but thinking very hard about
how do we create those wider opportunities in the future,
because we'd like to have our cake and eat it too.
Speaker 2 (07:47):
Just looking outside of our own interests, one of the
things that stood out to me was the tariffs that
are being applied to the poorer Southeast Asian countries. I
mean Cambodia forty nine percent on Cambodia, forty six percent
for Vietnam, forty eight percent for Laos. These are very
poor countries already. This is going to absolutely hammer them.
(08:10):
What does that mean for the glible economies and instability?
Speaker 3 (08:15):
Look, I'm really concerned. The world has made great progress
in reducing poverty within between countries over the course of the
last eight years, but this is likely to be quite seismic,
probably like what we saw during the Asian financial crisis
when the Asian tigers were hit really, really hard. These
tariffs are really big, and if they're implemented, many of
those countries that had been industrializing really fast lifting their
(08:38):
people out of poverty are going to slip back into it.
And it's also going to affect us, not just in
from a global citizen perspective, but also from a trading
perspective because we've benefited from the rise of these countries
like Vietnam, Cambodia across Asia. New Zealand has really benefited
from the rise of economic activity there. So we are
going to see this I think this ethical moral kind
(08:59):
of quandary of how can we help this people? And
the other part, which is the very direct selfish thing,
I think our exports will be hit.
Speaker 2 (09:08):
I mean, it's fun to make predictions, just as they
say here God laughing, is to make an undertaking that promise.
But where we're at now with what's been announced, how
long do you think this is going to be the
status quo for some time? Or is it we just
going to see constantly shifting sands as Trump tries to
manage the fallout because he hates the stock market going down.
Speaker 3 (09:27):
Well, I think Trump has proven to be very unpredictable,
and that's the uncertainty that we're all dealing with. We
just don't know if these policies will be implemented in
their current form as they've been announced, and how long
there will last. There is the hopeful person inside of
me thinks that by the midterms he's going to have
to relent because the cost on Americans is just going
(09:49):
to be too great. But the other side of me goes,
the pessimist side goes. But if he actually wants, if
he really truly believes that tariffs are the answer, then
he has to push through and that experiment can only
end in one way, which is a global recession.
Speaker 2 (10:03):
Actually, I did promise it was the last question I
got more. How flexible can we be with our trade
relationships to further mitigate the effects of it.
Speaker 3 (10:12):
We can be relatively flexible. We don't have a huge
amount of offer other than to provide leadership and that
trusted partner stentus and I think that counts for a lot,
because in a world that has become uncertain and untrusted,
being a trusted partner that believes in the rule of
law and that believes in free trade, I think we'll
count for a lot. So New Zealand actually stands in
(10:32):
a really strong position in this period of time and
I think we need to really move forward. And our
officials at MFAD are absolutely excellent. They have deep relationships
around the world. We probably are in a better position
than many other countries.
Speaker 2 (10:45):
Excellent, I have some of BEE will really appreciate your
time this afternoon.
Speaker 1 (10:48):
For more from the Weekend Collective, listen live to news
Talks be weekends from three pm, or follow the podcast
on iHeartRadio
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