Explained: What happened to the NZ economy since Trump’s ‘Liberation Day’ tariffs

Monday, 7 April 2025

It’s been a whirlwind four days since the “Liberation Day” tariffs were announced and if you’re thinking ‘what the heck has happened’ as the global economy runs wild you’re probably not alone.

Here’s a rundown on everything that has happened within the NZ economy since the 10% tarrif was slapped on New Zealand imports to the US.

How do the tariffs affect New Zealand?

Despite quietly sitting at the bottom of the world minding our own business, economist Shamubueel Eaqub said New Zealand has unfortunately been impacted in three key ways.

One, we are affected directly as the 10% tariff affects highly exposed exports such as our meat, wine and medical instruments.

Two, it affects us indirectly as countries we trade with such as China and Europe are getting hit hard and three, our financial markets have now become volatile thanks to the uncertainty about the whole situation.

“The general view is that it will be bad for the economy, and thus markets,” he said.

So what has happened with the NZD since Liberation Day?

The New Zealand dollar has taken a big tumble, hitting a two year low following the Liberation Day announcements on Thursday with the US-NZ exchange rate down by about 5%.

It fell from 0.5725 to 0.5552 cents.

ASB economist Chris Tennet-Brown said on Monday morning the NZD/USD started the week trading about 55.80 cents, which was more than one cent lower than a week ago.

The AUD and NZD recorded the largest one-day falls since 2009 falling from 1.0920 to 1.0775.

What happened to our stock market?

Since Donald Trump became President and talks of tariffs began the New Zealand stock market, and global stock markets to be fair, had been having a hard time.

On Monday morning the NZX was down more than 2% on opening.

But Kiernan said the immediate effects on New Zealand financial markets have been less pronounced with the stock market only falling less than 2% overall.

“Weaker US growth and weaker growth across the broader global economy is likely to negatively affect our export incomes and anticipated economic recovery, although the drop in the NZ dollar could mitigate the effects of weaker demand and lower prices for our exporters.”

Meanwhile the US stock markets had dropped by about 10% since Thursday.

And what does that mean for inflation?

For months we’ve been asking the question that Taylor Swift also loves to ask: Are we out of the woods? Are we in the clear yet?

And for a lovely, peaceful, moment it felt like we were - but thanks to the tariffs we may not be out of the woods just yet after all.

“Global inflation is likely to be higher than it would otherwise have been, and the weaker NZ dollar will also add to tradeable price pressures,” Kiernan said.

“However, the Reserve Bank will be balancing these effects against the slower/weaker recovery in the NZ economy, so there might be a little more scope for further interest rate cuts here to help cushion the demand effects.”

BNZ head of research Stephen Toplis said other nations had started applying “tit-for-tat tariffs on the United States”.

The Chinese have announced a 34 percentage point increase in tariffs on US goods after it was hit with a 34% tariff from the US. The European Union was also likely to impose a tariff on US goods.

“For a country such as New Zealand there is no point in playing this game. Imposing higher tariffs on imported goods would, like everywhere else, add to domestic inflation and weaken growth.”

What about my mortgage?

Mortgage rates have been dropping like crazy with banks lowering rates since the Official Cash Rate (OCR) began falling last year.

And with another OCR drop expected to be announced by the Reserve Bank on Wednesday - is now a good time to lock in?

“From a mortgage-holder’s point of view, there appears to a bit of renewed downward pressure emerging on fixed mortgage rates,” Kiernan said.

“Given the volatility in markets at the moment, there’s a lot of uncertainty around where interest rates head at the moment, so borrowers might want to keep their eyes open for opportunities around low rates, but also consider splitting their mortgage in case rates keep going lower than is currently expected.”

But there is still so much we don’t know…

There are a lot of implications from the tariffs that are just not known yet.

The Chicago Board Options Exchange's Volatility Index, a popular measure of the stock market's expectation of volatility based on S&P 500 index options, is at its highest since the early days of the Covid-19 pandemic.

Kiernan said the only other time it’s been higher since 1990 was during the Global Financial Crisis.

The uncertainty relates to a multitude of factors, such as including if the tariffs will remain as announced, how big the negative effects on US economic growth be, how much US inflation will increase by and how the US Federal Reserve will respond in terms of interest rates.

At the moment its a waiting game, but President Trump is still standing strong on his tariffs saying “hang tough”.