Here's our summary of key economic events overnight that affect New Zealand with news all bets are probably off on how 2025 will turn out as the cascading impacts from the Trump tariffs surge around the world.
We were anticipating we would be reporting some tariff retaliation news today, and there is some. But the most significant retaliation is from financial markets. If you normally skip the data hygiene paragraphs at the end of these reports, it might be a good idea to read them today to get the scale and depth of the negative market reaction. It is comprehensive.
So far there are no substantive retaliations announced, only threats to do so from China, Japan, South Korea, and the EU. But Canada has hit some US cars with a matching 25% tariff. Some countries - like New Zealand and Australia - have said they won't retaliate, but they tend to be the ones who only got slapped with a 10% rate on their exports. For them it is wise to see how much will be effectively paid by US consumers, and in NZ's case it will likely be most of it. Most of the impact on us will come from second-effect reactions in other trading partners.
Perhaps most galling were the 32% tariffs Trump slapped on Taiwan.
Back to the economic data releases, US jobless claims were unchanged last week from the week before and only marginally higher than year-ago levels. There are now 2.07 mln people on these benefits, about +7% above year-ago levels. But that is their highest since November 2021.
There was a surge in job cuts reported in March, by far the highest since the early pandemic reaction. Although most are public service cuts, it seems unlikely they will be the only ones in the months ahead.
The employment component of today's ISM services PMI was unusually weak, and the overall index tumbled to its weakest since July 2024. It was barely expanding in March. The internationally-benchmarked S&P Global/Markit version had its big drop in February, and the latest March version records a small bump up from then. But it reported cost inflation up to an 18-month high.
Attention now turns to tomorrow's March non-farm payrolls where a modest rise of +135,000 is anticipated.
US exports rose in March as part of the repositioning in anticipation of tariffs and retaliation. But an interesting detail is that of the +US$8.3 bln rise to US$278.5 bln for the month, US$3.2 bln of that was the export on gold. US imports held very high for a second month at record levels. (Imports of gold decreased -US$1.3 bln. The market chatter was that gold was flowing into the US, especially from London. Apparently that was just rumour.)
Across the Pacific in China, the Caixin services PMI rose in March and to its best level of the year. This was notably stronger than the official services PMI. New orders rose the most in three months, driven by increases in domestic demand, supported by a broad improvement in demand conditions. We see that in improved Chinese buying in the dairy auction.
Australia is reporting sharp drops in job vacancies. The latest data is for February, and the levels reported are almost -10% lower than year ago levels, down more than -5% in the prior 90 days alone. Almost all the decreases are in the private sector.
Container freight rates slipped -2% last week from the week before, to be -26% lower than year ago levels. However they are still +55% higher than pre-pandemic levels.
Bulk freight rates fell -2.5% from last week to be -8% below year-ago levels. Basically, these rates are back to pre-pandemic levels.
The UST 10yr yield is now at 4.04%, down -17 bps from yesterday at this time. The key 2-10 yield curve is still at +31 bps. But their 1-5 curve is now inverted by -19 bps, a sharp deepening. And their 3 mth-10yr curve is much more inverted, now by -26 bps. The Australian 10 year bond yield starts today at 4.27% and down -17 bps from yesterday. The China 10 year bond rate is now at 1.79% and down -6 bps. The NZ Government 10 year bond rate is now at 4.43%, and down -12 bps from yesterday at this time. Every one of these moves is outsized in a fear-induced way.
The VIX volatility index has jumped suddenly, although not yet to an extreme level.
Wall Street is in its Thursday session down -4.3% on the S&P500 after the tariff announcements and showing no signs of improving. Overnight, European markets all fell about -3.0% except London which was down about half of that. Yesterday, Tokyo ended its Thursday session down -2.8%. Hong Kong was down -1.5% and Shanghai down -0.2%. Singapore fell -0.3%. The ASX200 ended its Thursday session down -0.9%. But the NZX50 was the outlier, ending up +0.1% after the initial shock lower.
The price of gold will start today at just on US$3108/oz and down a net -US$24 from yesterday.
Oil prices have dropped -US$5 from yesterday at just on US$66.50/bbl in the US and the international Brent price is now just under US$69/bbl. Not only is demand expected to soften as tariffs take their toll, eight OPEC+ countries unexpectedly announced a +411,000-barrel-per-day production increase for May, far exceeding the planned +135,000 bpd. It seems an incredibly naive announcement from their self-interest point of view
The Kiwi dollar is now at 58.1 USc and up +80 bps from this time yesterday. That is a +1.8% appreciation since the start of the week and a +3.8% appreciation since the start of March. Against the Aussie we are up +40 bps at 91.5 AUc. Against the euro we are down -20 bps at just over 52.6 euro cents. That all means our TWI-5 starts today now just on 67 and up +20 bps.
The bitcoin price starts today at US$82,172 and down a sharpish -5.8% from this time yesterday. Volatility over the past 24 hours has been very high at +/- 4.1%.
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26 Comments
Markets go down like a fat dog on wet lino
As far as these tariffs go, "its promises made and promises kept" - by the US president.
Those who have not positioned appropriately into cash or cash funds well in advance, will learn some obvious lessons on market reactions.
KiwiSaver providers job is not to scare the horses and keep their gravy train a rollin.
But switching funds goes against all the best advice pushed by every find manager I've ever heard or read.
Completely agree btw
I'm surprised DC is still able to do a morning report after this blasphemous comment yesterday relating to kiwisaver. I would have thought every media kiwisaver commentator would have been round for a good lynching.
"However advice that this is just normal business cycle volatility looks incredibly self-serving. "
DC has a problem, in that he repeats a false narrative. The divergence between that narrative, and the physical truth(s) (about human overshoot on a finite planet) is widening at an accelerating rate. Because that narrative is blind (energy-blind, resource-blind - and only accounts in keystroke-issued digits), it tries to expliaing macro issues it terms from within its narrow focus.
Thus 'it must be Trump at fault'. No, Trump is a repercussion of the malaise, and wouldn't have been RE-elected, if things had been as rosy as the mainstream narrative claimed. And getting rid of Trump, won't solve the malaise, either. Any more than the splitting of Rome into two, solved their (miniature version of the same) problem.
Goff should be lauded this morning - speaking truth to bu--sh-t. There should be more of us brave enough to do the same. Globally, we are traversing the Limits to Growth - what we do about that, is the bigger, more immediate question.
https://www.planetcritical.com/p/sarah-wilson
Note the lady's background.
CNN has a few articles that outline the level of BS in Trump's speech. Bottom line - most of it. In reference to Canada they note that there is an agreement between to two countries for a tariff free quota to go to Canada of milk, which the US has never filled. In fact only exports about half the level. So Canada has never applied tariffs to US dairy products. The other point that applies to us is how the tariffs were calculated;
"Instead, the Trump administration used quite a simple calculation: the country’s trade deficit divided by its exports to the United States times 1/2. That’s it." and "For example, America’s trade deficit with China in 2024 was $295.4 billion, and the United States imported $439.9 billion worth of Chinese goods. That means China’s trade surplus with the United States was 67% of the value of its exports — a value the Trump administration labeled as “tariff charged to USA.” "
More proof that he really doesn't understand what he is talking about. That the GOP persist in defending and supporting him really does show the level of corruption in the US government. I saw a new video of Mitch McConnell the former Speaker of the House and leader of the House Majority essentially bragging about how they blocked Biden and Obama without essentially understanding that the effect of their actions was to all extents anti-democratic and could have been seen as unconstitutional.
The current administration only refers to the constitution if it benefits them, otherwise they see it as a barrier to their ambitions and something they are above. Their actions speak volumes in this area.
"There does not appear to have been any tariffs used in the calculation of the rate. The Trump administration is specifically targeting nations with large trade surpluses with the United States relative to their exports to the United States,"
https://www.rnz.co.nz/news/world/557136/the-dubious-way-donald-trump-ca…
Trump never read the competitive / comparative advantage textbooks
Do Kiwis realise that when Americans buy New Zealand goods, it feels like everything is 50% off? Our exchange rate with the USD is a joke—it doesn’t reflect reality at all.
Take this example: a burger and fries costs $20 NZD here. In the US? It’s also $20 USD. But once you add tax and tip over there, you’re looking at a $25 USD meal ($43 NZD!!). Meanwhile, that same $20 NZD meal is only about $12 USD.
New Zealand is incredibly cheap right now, and most Kiwis have no idea. The RBNZ has absolutely wrecked the NZD’s value over the past few years.
So when the US adds a 10% import tax on NZ goods, that doesn’t suddenly make them expensive. Even with the tariff, our products are still massively undervalued.
Remains to be seen but in the past when the USA has imposed a tariff on NZ meat it cost the American consumer nothing more because the tariff was compensated for by a deduction to the invoice price. For example President Clinton imposed not only a tariff (then called a duty) but also a quota on NZ & Australian lamb imports and while the importers physically paid it, they clawed it straight back from the exporters by way of such deductions.
Sanford seem to be pretty confident at this point:
"We have discussed the possible impact from tariffs with our key US customers. As always, the impact depends on who pays. At this time, we do not expect these tariffs to have a material effect on the performance of Sanford in FY25."
Who pays really comes down to individual product performance. A producer/exporter may have no choice but to pay if there is no alternative market of sufficient volume and even with a 10% discount the USA may still be the best price. Needs to remembered that all the tariffs that Trump imposed in his first term, on China for example, were left intact by Biden so in one way or another life and trade carried on regardless. But even so there are inherent distortions in play for example American soy bean producers were being subsidised because of the Chinese counter tariffs.
Please tell us which burger costs USD 25 in the states?
At the low end of the market, looks like prices are a little cheaper here. Big macs are $5.70 in the US vs $4.99 here (both in USD I believe)
https://worldpopulationreview.com/country-rankings/big-mac-index-by-cou…
The best source for the Big Mac Index is The Economist, as it is the original creator of the index and publishes it regularly with comprehensive data and analysis.
https://www.economist.com/interactive/big-mac-index
Truflation also has a real-time Big Mac Index. $5.70 for a Big Mac is accurate.
I was referring to sit-down restaurant pricing, not takeaway fast food—though even fast food highlights how cheap NZ is by comparison. Over there, it's now $10–15 USD for a basic burger and fries at places like In'n Out or Shake Shack. Even a drink from Starbucks is like $6 USD now.
As for sit-down table service spots, $25 USD (after tax and tip) for a burger and fries is normal. That was definitely the case in the cities I’ve visited recently—Los Angeles, Austin, Nashville, and Houston. Prices might vary by region, but in major US cities, it adds up fast.
Export log prices have taken a hit. Back below 1992 prices, coupled with record global production.
https://openknowledge.fao.org/server/api/core/bitstreams/768ba59e-c692-…
Someone tell BNZ.
"“The world isn’t on a path for net zero by 2050 and so any bank or asset manager that’s being told to align lending or investment practices to that kind of pathway is aligning with a fictitious world,” he said.
...For the moment, however, banks that focus on decarbonization are likely to be penalized the most, said Nigel Topping, the former United Nations climate champion for COP26. Currently, any bank CEO who says “I’m going to exit the fossil-fuel sector would be sacked the next day” because the company would be giving up too much earnings potential, Topping said."
https://www.bloomberg.com/news/features/2025-04-01/trump-oil-policy-has…
Much better to pile up digits in a computer, than to hand on a habitable world to our grandchildren.
Soooooooooooooo clever...
And it's not just CC - that's just the exhaust impact.
The mentality of screwing the future generations has never been stronger. Extract now, profit, have more money = more freedom and opportunity, then die. Maybe pass on to children, maybe not, but the care factor en masse isn't there, with an added motive that the system is set up as you say, on a false narrative. Even removing fossil fuels from the equation, and looking only at human labour as a resource, the systems are set up to assume every generation will be bigger than the last. Without this occurring, the house of cards topples, and we will keep immigration rolling until it is addressed.
The human resource factor is a far, far bigger factor than any climate change chicken little 2100 predictions. Mass immigration crashes the birth rate as young people cannot afford the immigrant pressure on housing cost, wages rates and overflowing healthcare. Not to mention the pension/nursing costs in an inverted population pyramid.
"People underestimate how quickly this effect will be felt. South Korea currently has a total fertility rate of 0.81. For every 100 South Korean great-grandparents, there will be 6.6 great-grandkids. At the 0.7 fertility rate predicted in South Korea by 2024, that amounts to 4.3 great-grandkids. It’s as if we knew a disease would kill 94 percent of South Koreans in the next century."
Side track here, but maybe the Korean birth rate might improve if K-dramas allow a little more human contact maybe even kissing or perish the thought, sex!! And stop telling its actors they have to be pure, no dating etc (so the teenage girls and frustrated housewives can lust away happily, that is of course itself hypocritical)…..
Can you elaborate? In my mind, if we had low immigration we would have a population decline, the pension system would implode very quickly at current settings and we'd need a rapid rejig of the tax system, means testing etc to be able to afford it, if at all, and we would have to triage much heavier than current for health needs as we would not have the level of human labour currently demanded from our current level of cares (rest homes, hospitals, hospices).
Re the birth rate, immigrant pressure on housing cost is one factor only, but landlording as a mass adopted retirement investment vehicle also adds to this. Still, there's never been more options and career choices than today for young people, especially for women in historical comparison.
South Korea migrant population is 3.8% of the population. Once again a cursory look and profiles statements fall apart at the seams...
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