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Today is ‘Liberation Day’ in the USA and Donald Trump has announced his promised reciprocal tariffs on trading partners.
Key takeouts:
- There is a baseline minimum tariff rate of 10% for all countries except Canada and Mexico
- Tariffs apply from 12:01am EDT on April 5th (tomorrow morning)
- New Zealand has attracted reciprocal tariffs of 10% (equal to the baseline minimum rate)
- The USA has calculated an equivalent tariff rate for each country based on barriers to trade that US officials believe US producers face to sell into those markets
- This number includes the effects of non-tariff barriers like quotas and biosecurity restrictions
- It also includes the impact of currency manipulation and ad valorum consumption taxes like the GST
- The USA has calculated New Zealand imposes barriers equivalent to a 20% tariff rate
- Donald Trump has described these reciprocal tariffs as “kind” because the rates that the USA is imposing are typically half the value of the trade barriers that US exporters face (except for countries like Australia and the UK, where US exporters face very low barriers already)
- China has been hit with a 34% tariff on top of the 20% tariffs that had already been announced
- Other tariff rates for selected economies:
- Australia 10%
- UK: 10%
- EU: 20%
- Japan: 24%
- India: 26%
- South Korea: 25%
Who pays the tariffs?:
- Importers pay the tariffs, but US consumers bear most of the cost through higher prices passed through by the importers.
- Foreign exporters are likely to lose out to a lesser extent through lower prices.
- ‘Who pays’ is ultimately determined by the elasticity of supply, so it will vary depending on the product type.
Potential implications for NZ agri exports
The United States is a top 3 export destination for New Zealand agriculture. Major export products include beef, sheepmeat, dairy & wine
Initial thoughts:
- New Zealand has come out comparatively well in the short term by only having tariffs applied at the baseline rate, and only paying tariffs equivalent to half the value of the trade barriers faced by US producers accessing the New Zealand market (according to US officials).
- BUT... this might also mean that New Zealand is more exposed than the likes of Australia (tariff barriers imposed by the US are equal to 100% of the value that US producers face to access the Australian market) if the USA decides to increase tariff rates in the future.
- The 34% tariff on China increases the total tariff rate to 54%. That is going to impose substantial growth headwinds for the Chinese economy that will likely have spillover effects for NZ.
Beef:
- For beef in 2024, the US was the #1 export destination for both New Zealand
- The US made up 38% of NZ beef export volumes (182,000 tonne) exported and 42% of value at NZD 1.839 billion in 2024
- A 10% across the board tariff does not appear to disadvantage New Zealand beef exporters relative to competing origin countries (contingent on tariff treatment on Canadian and Mexican beef). In some cases – where competition comes from countries with higher tariffs – New Zealand producers may be in a slightly better competitive position.
- Tariff rates for competitors to NZ beef into the US market:
- Australia 10%
- Argentina: 10%
- Brazil: 10%
- Uruguay: 10%
- Nicaragua: 18%
- Canada: Up to 25% (contingent on USMCA application)
- Mexico: Up to 25% (contingent on USMCA application)
- Demand for manufacturing (lean trimmings 90 + 95 CL beef) in the US is likely to be high until around 2029 due to the US beef herd rebuild.
- New Zealand exports the exact product the US needs most of right now. Consequently, we don’t expect demand to be dampened by a 10% tariff.
- The bigger concern/watching point may be a shift in trade flows/ effect on China, who is another important market for New Zealand.
- Global beef production is also down in 2025 (and likely will be in 2026) so beef is protected a little bit through this as demand may exceed supply across many markets.
Sheepmeat:
- For NZ sheepmeat, exports to the US are mainly lamb
- The US made up 9% of volumes (35,000 tonne) and 17% of value (NZD 625 million) for total sheepmeat exports (19% of the value for lamb only) in 2024.
- Australia and New Zealand are the major exporters of sheep meat to US and have the same 10% tariff.
Dairy:
- In 2024 New Zealand shipped 3% of its total dairy volumes or 6% of the value to the US.
- Dairy exports largely comprise whey, casein, caseinates and butter products
- In 2024 the US imported USD1.03b of dairy produce, with NZ accounting for 5% of total value of import share.
Wine:
- The US is New Zealand’s top export destination for wine.
- In 2024, ~31% of the NZ wine production volumes was exported to the US.
- In 2024 the US imported USD7.2b of wine. NZ accounted for 7% of this.
- The largest wine exporters to the US, France and Italy, will face a tariff rate of 20%, 10% more than New Zealand and other large non-EU wine exporters. While these tariffs may impact total wine exports to the US, NZ should be relatively less negatively impacted than EU exporters.
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4 Comments
How much can US consumers pay?
They're a dying hegemony, in deficit, running an asset Ponzi.
They didn't actually calculate tariff rates + non-tariff barriers, as they say they did. Instead, for every country, they just took the trade deficit with that country and divided it by the country's exports.
So a $17.9 billion trade deficit with Indonesia. Its exports to US are $28 billion. $17.9/$28 = 64%, which Trump claims is the tariff rate Indonesia charges the US. Kind of nonsense.
From their own source, quote:
Findings
The reciprocal tariffs were left-censored at zero. Higher minimum rates might be necessary to limit heterogeneity in rates and reduce transshipment. Tariff rates range from 0 to 99 percent. The unweighted average across deficit countries is 50 percent, and the unweighted average across the entire globe is 20 percent. Weighted by imports, the average across deficit countries is 45 percent, and the average across the entire globe is 41 percent. Standard deviations range from 20.5 to 31.8 percentage points.
AKA 'Liquidation Day'
The largest wine exporters to the US, France and Italy, will face a tariff rate of 20%, 10% more than New Zealand
Shouldn't that be 100% more? 🤔
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