Trade chaos coming?

While New Zealand isn’t in Trump’s direct line-of-fire, Jacobi believes NZ exporters to the US will be worried.

Jacobi, the executive director of NZ International Business Forum and a member of the APEC Business Advisory Council, says things remain uncertain and speculative at this stage.

“It’s hard to say at this point, but if President Trump were to do what he says he intends to do – raise tariffs of 25% to Canada and Mexico, plus up to 50% for China, plus 10-20% for everyone else – we could see chaos,” he told Rural News.

“Trade disputes morphing into trade wars and considerable trade diversion as products are switched between markets.

“I know NZ exporters are concerned. They may not worry about things that are so uncertain and speculative, but there is no doubt that NZ’s exports, worth $9 billion, to the US would be impacted negatively if the tariff increases were to proceed.”

Jacobi notes that the previous Trump administration negotiated the US, Mexico and Canada free trade deal, so any tariffs would be a surprise.

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“At another level I’m not surprised because nothing this gentleman does should come as a surprise. I would be surprised – pleasantly – if he decides not to raise tariffs.”

Jacobi expects countries hit by Trump’s tariffs to retaliate.

“I expect they will apply tariffs on US exports to their markets. That’s what the Mexican President has already said. It’s what China did last time.

“But I imagine everyone will want to strike a ‘deal’ of some sort. It’s also not a straightforward thing to implement tariffs in a highly integrated North American manufacturing market, where componentry may cross the border several times as part of complex supply chains.

“We can only expect China to respond as they did last time with tariffs of their own on US exports. We may see some fall-out of American products being re-routed to other markets to which we are selling.

“We saw that last time, especially in horticulture. It all depends on how any tariff increase is applied (if at all), the products it applies to and the timing.”