Why is Trump including GST in its definition of 'tariffs' charged on US exports to New Zealand?

Thursday, 3 April 2025

President Donald Trump speaks during an event to announce new tariffs in the Rose Garden at the White House, Wednesday, April 2, 2025, in Washington. (AP Photo/Mark Schiefelbein)

The US’s calculation that New Zealand imposes 20% tariffs on US goods entering the country is “outside the realm of reality”, economist Brad Olsen says.

The US has imposed a 10% tariff on all New Zealand exports to the US, claiming that was a “discounted” rate as it faced 20% tariffs into New Zealand.

But that US calculation appears to include New Zealand’s 15% GST, despite the fact that it is charged on all goods and services sold in New Zealand, and despite the fact that the US has its own sales taxes.

“The inclusion of GST is simply not in keeping with what what we are discussing on tariffs,” said Olsen, chief executive at Infometrics.

“Realistically, it’s a convenient way to up the numbers, and create the feeling of greater unfairness,” he said.

Trade expert Stephen Jacobi said the 10% tariff was at the “lower end of the pain threshold,” but it was far in excess of the actual tariffs New Zealand charged on US products.

After weeks of White House hype and public anxiety, President Donald Trump is set to sign a barrage of self-described “reciprocal” tariffs on friend and foe alike.

“The average tariff we apply to the US is 1.8%,” said Jacobi from the New Zealand International Trade Forum.

Jacobi did not see a lot of science in the US estimates of the “tariffs” faced by US companies on exports to other countries.

The UK had a value added tax, known locally as VAT, of 20%, and yet the “reciprocal” tariff imposed on the UK was just 10%.

The US was not applying the same rules to all countries, Jacobi said.

Trade expert Stephen Jacobi says there’s not much evidence of science behind the US’ calculations of tariffs its exporters supposedly face in otehr countries.

“They have obviously taken a very broad brush approach. That’s obvious. There’s not a lot of science in this,” he said.

The United States does not have a federal sales tax like GST, but individual states do have sales taxes.

In Washington, for example, the retail state sales tax is 6.5% with “local” rates added on top country by county, taking it to around the 10% mark, not very far short of New Zealand’s national GST.

Economist Brad Olsen described US tariff estimates as ‘outside the realm of reality’.

“New Zealand negotiators are in for quite a lengthy business,” he said.

Olsen thought it might be a good idea for New Zealand to keep a low profile with the US, and put its efforts into diversifying its exports to other countries, and away from the US, which is our third-largest trading partner.

New Zealand had been trying for years to get a free-trade agreement with the US, and had got nowhere, Olsen said.

“For New Zealand, it is in our best interests to remain off the radar,” he said.

“Don’t put a target on our backs,” he said.