Pension plans, investments set to fall as markets reel from tariff tit-for-tat

Tuesday, 8 April 2025

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Many Kiwis look set to see the value of their pension plans and investments fall further as global markets reel in the face of United States and retaliatory tariffs.

Prime Minister Christopher Luxon voiced concern, saying tariffs and trade wars led to inflation and slowed down economies.

“What we are seeing is markets in turmoil across the world.”

The NZX top 50 index was down 3.4% in late afternoon trading while the ASX top 200 index slumped a further 4.4% as investors fretted over the fall-out from United States President Donald Trump’s trade war.

US futures markets, which should provide a guide as to what may happen to shares on Wall Street overnight on Monday, New Zealand time, were also down about 3%, pointing to the probability of more trouble ahead.

However, sitting alongside those fears was a recognition that markets could bounce back if the US Republican Party got too spooked and forced a change of course.

BNZ senior markets strategist Jason Wong said Trump’s actions beggared belief.

“One man has almost single-handedly knocked the world economy off its pedestal.”

The decline in the value of shares would reduce consumer spending, he said.

But there could be some sort of silver-lining in the form of lower mortgage rates and petrol prices, with oil prices down about 10% since Trump’s “liberation day”.

Kiwibank said the “market mayhem” had resulted in financial markets assuming that the official cash rate was most likely to fall to a low of 2.5% or 2.75% in the current economic cycle.

Prior to Trump’s announcement, they had been pricing in a low of 3%.

The fall in equity markets can also be expected to impact the Government’s finances and increase net debt by cutting the value of investments held by the NZ Superannuation fund and ACC.

One of the practical problems caused by the tariffs, and the knock-on response to them from other economies, is that it may be difficult for exporters to accurately forecast demand from the US and other markets.

Simon Bridges, chief executive of the Auckland Chamber of Commerce, said it would be easy for anyone to make a fool of themselves making predictions, given the levels of uncertainty about how events would unfold.

Markets and economies were in a state of shock and “a bunch of very different scenarios could play out”, he said.

“There will be very big, sophisticated businesses going into the US that perhaps have quite clearly defined strategies, even in uncertain times. I really feel for the smaller ones, though, where they’re probably just licking their finger and putting it into the air to work out what it means for them.”

It was possible that some New Zealand exports to the United States could rise in value despite the 10% “base” tariff they are subjected to, given many other countries had been hit hard.

“It's not entirely unforeseeable that in some areas, demand goes up.”

But the fall-out could be different for each industry sector, he said.

“What happens with wine might be incredibly different to what happens with rockets, or with software-as-a-service, for example.”

Philip Gregan, chief executive of New Zealand Winegrowers, said it was too soon to know what the reaction of US consumers would be to the tariffs.

“It will be up to individual businesses to discuss the implications of the new tariff with their importers, distributors, and retailers.”

Meat Industry Association chief executive Sirma Karapeeva said it was also too soon to determine the impact tariffs would have on red meat exports to the US.

“Exporters are keeping a close watch on developments and are engaging with their customers to understand how these changes might influence purchasing decisions.”

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